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All that glitters is not green: The challenge of sustainable luxury

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The European Business Review
All that Glitters is not Green: The challenge of
sustainable luxury
Sustainable development is on the agenda of
the planet. Intensive demographic and eco-
nomic growth without ecological concerns
jeopardizes the life of next generations. Gov-
ernments, NGO’s and consumers ask all eco-
nomic sectors to change fast.
Luxury has recently been a target for public
criticism: it would be lagging, if not at odds
with sustainable development imperatives.
Focusing on specific products and consumers,
critics point at the waste of resources for the
pleasure of a happy few. Luxury attracts spe-
cial attention for, beyond ecology, sustainable
development talks about social equity. Now, a
deeper analysis reveals how much sustainable
development is deeply congenial with luxury,
but real luxury: both take rarity as their cen-
tral concern and real luxury is by definition
durable. Certainly luxury highlights the in-
equality of society, but it does not create it.
Acting as paragon of quality, luxury will need
to act as a model in sustainability. All major
real luxury brands have already responded
to the demands of sustainability, but without
much communicating. Can luxury brands be
at the leading edge of sustainability? Still much
remains to be done. Finally a luxury strategy
is the most efficient way to foster ecological be-
haviours.
40 November - December 2010
By Jean-Noël Kapferer
Luxury under pressure of sus-
tainable development
Sustainable development has become the
major collective challenge of all states on
our planet. Although not all of them signed
the Kyoto Agreement, most of them mani-
fest a concern about the limits of our natu-
ral resources, the need to find a new type of
economic growth taking into account the
costs of its collective negative fallouts, so far
unmeasured, which bear on the future gen-
erations.
Sustainable development (SD) is a global
concept promoting a society that can persist
over generations. As a result it should make
prudent uses of the planet resources (physi-
cal, human, biological). Beyond ecology,
sustainable development promotes the con-
servation of biodiversity, of natural resources,
and is also concerned with social equity. At
the extreme, some advocates of SD consider
that growth in itself is the problem.
Many countries have already incorpo-
rated this new paradigm in their public poli-
cies, legislation and regulations. Incentives
and laws are being enforced whereby they
give quantitative targets for carbon diox-
ide emission reduction or pollution control.
Sustainability demands impact consumers
themselves either as polluters through the
type of purchases they make, or as guardians
of suspect corporate actions. Active militant
groups and NGO’s scrutinize corporate and
industrial behaviour and reveal the culprits
to the public.
Recently the luxury sector has come
under enormous scrutiny. Reports have
criticized this industry for lagging behind
(Bendell, Kleanthouse, 2007). Some even say
that sustainable and luxury are incompatible
terms. To drive a Rolls Royce, a Maybach or a
Mercedes S Class would be a message that
the owner couldn’t care less about gas over-
consumption and the warming of the atmo-
sphere. Although it is the projected mass dif-
fusion of middle range cars in China or India
which constitutes a threat for the planet,
critics point at the behaviour of the richest
whose energy consumption per capita is dis-
proportionate. As a consequence, many pro-
fessional Conferences and Symposia on Lux-
ury and SD have emerged, where the stars
of the sector have at first not been present.
Since luxury is supposed to mean excellence,
the prospect of being criticized explains their
initial reluctance. This does not mean they
were not concerned: as for CSR, all luxury
groups (LVMH, PPR, etc…) had already put
SD at the top of their agenda as early as 2001,
but have not publicised it. Luxury has moved
forward but does not talk much about it.
The focus of this article is to analyze in
depth the relationship of luxury to SD, both
conceptually and practically. Conceptually,
luxury is a fashionable word used by many
companies and brands who are not in fact
implementing a luxury strategy, but a fashion
strategy or a premium strategy. For instance
L’Oréal Group can hardly be seen as a luxury
group: it does not define itself as such. Its
most known brand L’Oréal Paris is sold only
in supermarkets, as well as Garnier, Maybel-
line etc... Surely there is a prestige division
with Lancôme as flagship – a mass prestige
brand- and the fragrance licenses of major
luxury or fashion brands. Yet both activities
do not qualify as luxury due to their mass
production and the predominance of quan-
titative goals over qualitative rare excellence.
We need to put the word luxury back in its
real meaning.
In terms of practical issues: to what ex- goal of becoming sustainable luxury models. ability of its resources: high prices limit the
tent can luxury brands incorporate sustain- We do not talk here about « greenwashing » demand and is the best way to protect the
ability demands and yet remain luxury? For like sending money to some Wild Forest Pres- future of these resources, hence of the sec-
instance sustainable author Bendell (2007) ervation Group and letting it be known, but tor. What most threatens the resources of
mandates luxury brands to produce environ- rather a true incorporation of the green con- the planet is mass production, not small
ment friendly products and services. How- cerns (another word for SD) into the whole productions. The over consumption of plas-
ever the world’s least gas consuming car value chain (sourcing, creating, manufactur- tic packaging of mass consumer goods
is the small Nano made by Indian Tata and ing, logistics, distribution, marketing, servic- (bottled water for instance) far exceeds the
sold at $2629. Since luxury can be defined ing, waste and recycling). recycling capacities of the world. The nice
as the highest quality and creativity without and sophisticated wrappings around luxury
constraint, hence disregarding costs, its cars Luxury and SD share two deep products, as a symbol of a gift to oneself or
will be more consuming than a Nano unless concerns: rarity and beauty another person, are a tiny drop compared
luxury takes on the mission to be the first to A deeper analysis reveals that Luxury and to this ocean of neglected ecological dam-
develop fully electric superb cars for those Sustainable Development converge: both fo- ages, more so if the paper today is recyclable.
consumers who can afford them and will be cus on rarity and beauty. The essence of real Luxury is the enemy of the throw away so-
pleased to show how rich and also environ- luxury is to sell high quality, creative and rare ciety.
mentally conscious they are. This has been objects with an image of good taste and el-
the success of Tesla. Nevertheless, in many egance. Historically luxury was the privilege
other luxury sectors, a 100% move to ethical of those who had money, taste and power.
trade and green concerns today would hurt Recently its growth - and deviation- is due
the quality of their products. However, silent- to an over-extension of its consumer basis,
ly, all luxury groups have adopted the high through accessible mass produced acces-
sories which cannot be qualified as luxury
products, even if they are endorsed by luxury
A deeper analysis re- brands. But the recession will put luxury back
veals that Luxury and into its rightful place.
Sustainable Development Beyond the brand exclusive image, luxury
value is based on its objective rarity –rare
converge: both focus on skins, rare leathers, rare pearls, rare materials,
rarity and beauty. rare craftsmanship. Thus luxury is resource
dependent and obsessed by the sustain-

www.europeanbusinessreview.com 41
The European Business Review
Distinguishing the luxury strat-
egy from a fashion or premium
strategy
Can there be any beauty based upon a mass
of disgraceful pollution and unfair labour
practices? Because the word luxury has be-
come so fashionable, many companies use it
to justify their own existence. However, to say
is not to do. Kapferer and Bastien (2009) have
shown that luxury is in fact a business model,
created by the likes of pioneer companies like
Rolex, Louis Vuitton, Hermès, Ferrari, Chanel,
and that many so-called luxury brands were
in fact following another business model,
closer to that of fashion or premium goods.
Real luxury is not aimed at cost reduction
but at the creation of value, through rare and
unique singularities, like no-delocalization.
Unlike fashion brands which delocalize as
much as they can, luxury adds up elements
of uniqueness like producing in its home
country. The scandal of sweat shops in China
was associated with mass brands such as
Nike and with fashion brands who have all
delocalized their production in the far east,
in order to capitalize on low labour costs, and
the corresponding work conditions which
accompany this.
• Importance of crafted, handmade prod-
ucts and rare savoir faire. Far from exploit-
ing unskilled labour forces, as does the mass
fashion industry, either directly or through
its licensees, luxury brands need to sustain
skilled forces and even recreate schools to
revitalize curricula which are disappearing.
• No licenses. Luxury brands produce goods
in-house, even their accessories. Chanel
watches are made in the Chanel factory.
Chanel N°5 is made by the House factory too.
On the contrary, fashion brands multiply the
licenses worldwide. This is built-in into their
business model. Once a product is out of
fashion, it must be sold with huge discounts
42 November - December 2010
on e-commerce sites, or factory outlets. This
destroys the margin: Delocalisation and the
use of licensees to meet the need of fashion
to have the garments produced anywhere
in the world at minimal cost often means
that licensees are rarely well controlled and
licensees in turn can hire sub-licensees, with
virtually no control over the labour condi-
tions.
Durability is the enemy of
the fashion industry and
of the mass market in-
dustry, based on planned
obsolescence. On the
contrary, luxury is the
business of lasting worth.
Why this present SD focus on
Luxury is by definition durable luxury ?
Durability is at the heart of sustainable devel-
opment as well as luxury. Durability is the en-
emy of the fashion industry and of the mass
market industry, based on planned obsoles-
cence. On the contrary, luxury is the business
of lasting worth.
Ninety per cent of all Porsches produced
are still being driven. Louis Vuitton provides
after sales services to any genuine LVuitton
product, whenever it was bought. The same
holds true for Ferrari: the Maranello mechan-
ics will work on any old Ferrari, whatever its
age. This is why there is a large aftermarket in
the luxury business.
At a managerial level, durability is a central
tenet of luxury companies. On the contrary,
the fashion business lives on short cycles, a
short span of time, a short time perspective
like the next Vogue issue.
Luxury is managed with a « long term »
perspective. Often these Houses are a centu-
ry old and refer to a heritage that is a key part
of their intangible extra value. New designers
called to reinvent the brand, to make it rel-
evant to the younger clients of the world, pay
due tribute to this heritage and reinterpret it
with respect. Often in family companies the
managers are not pressed to deliver high
growth figures at each quarter, whatever the
economic circumstances. Finally, products
are built to last and forgo obsolescence, their
beauty should last, as should their function-
ality: hence the service associated with them.
All Miele appliances, for example, are built to
last up to 20 years.
Why would such an industry that is
obsessed with durability and that is so re-
source dependent overexploit its own re-
sources? Jewellers care for their mines for
their future depends on them.
According to the estimations of Bain & Co.
luxury total revenues amount to 160 Billion
Euros in 2009. Why would a sector a bit big-
ger than WalMart be so concerned about its
sustainability? Because this is a very visible
sector, whose public attraction is linked to its
high profile consumers, VIP’s and celebrities.
SD advocates care also about social equity.
No sector reveals the world social inequal-
ity as much as luxury . Because economic
growth in most emerging countries is based
on the desire of the middle class to emulate
the richest, luxury is said to be a factor of
social tension. Due to its conspicuousness,
luxury encourages aspirational consumer
buying beyond rationality.
We should however remind ourselves of
existing realities. Economic growth based on
internal demand supposes that this demand
exists: imitation is a potent lever of consum-
er behavior (the famous « keep up with the
Joneses »). Moreover, we are in an era where
resources will be scarcer. Is it due to luxury?
Of course not: it is due to mass consumption
growth. The many low cost airline companies
have boosted global consumer demand for
air travel –a high kerosene consumption ac-
tivity - Not the private jets.
So why this focused critique of luxury?
Because of the symbolic nature of luxury
consumption as a human activity and the
celebrity of its main clients.
First, luxury purchases are by definition
irrational. Why pay 1500 dollars a handbag
whose function is the same as a handbag at
150 dollars? What is paid through the 1350
dollars difference? The essence of luxury
is singularity: everything which makes the
piece appear out of the ordinary. It encom-
passes the objective extreme quality to the
home country where it must be made, as
well as handcrafting, time, and the one-to-
one caring service in exclusive retail stores. It
also extends to the capacity of the brand to
single out the buyer as a person of taste, el-
egance and status (Han et al., 2010 ). The con-
sumer becomes someone out of the ordinary,
someone unique, as long as this is signalled
by preeminent logos: hence the craze in Asia
about luxury goods and brands (Chaddah
and Husband , 2006). After 50 years of com-
munism and forced uniformity, the Chinese
can dress as they want to be perceived, and
show they are no more poor. Consumption is
their only zone of freedom and elevation.
The irrationality of luxury is precisely what
makes it stand apart from all other types of
purchases (art excepted): buying objects be-
yond mere functional reasons is a sign of hu-
man elevation in Maslow’s pyramid.
Secondly, luxury means excess: it comes
from its latin root luxus. In luxury everything
is in excess compared to standard industrial
products or services, a fortiori to low cost
ones. Since the luxury industry exhibits the
highest gross margins of all sectors (Tabatoni
et al., 2010), it is not much concerned by cost
reduction but by creation of value: making
the buyer feel VIP, and stand apart. This starts
at the ingredient level - only the best ones
- then production (with much care, time,
expertise, quality, craftsmanship...), retailing
(in the nicest places and environments), ser-
vicing and branding (the conspicuous name
endows prestige, glamour and distinction
The many low cost airline
companies have boosted
global consumer demand
for air travel –a high kero-
sene consumption activ-
ity - Not the private jets.
on the buyer). Now this excess is by defini-
tion criticized in a SD perspective which
promotes an opposite ethic: frugality, self
restraint today to ensure the happiness of
the next generations. Why have big engines
if small engines are sufficient to power cars
which in any case will be used only to go
from home to downtown and vice versa? A
6.5 litre Bentley engine for the pleasure of the
few rich is a provocation.
Thirdly, luxury signals inequality. Only
the rich can buy Bentleys, huge gas guz-
zling yachts, private helicopters or jets etc…
Beyond achieving their personal dream,
these happy few are also destroying collec-
tive capital. Certainly there are very few rich,
compared to the billions of Chinese or Indian
consumers shopping to drive a real car (not
only a Nano –Tata’s ultra small car). But, per
capita, the rich would overexploit collective
Luxury is criticized by SD advocates not so much because
of its objective impact on the planet resources but because
of its high visibility, and its considerable symbolic power,
much higher than its real economic weight.
capital (natural resources which cannot be
replaced).
The SD critique of luxury points at emerg-
ing countries where the extremely poor co-
exist with the extremely rich. Interestingly
however, it is the biggest communist coun-
try in the world (China) which itself promot-
ed luxury consumption in its own domestic
market. After the Tien-an-men events, Chi-
nese Prime Minister Deng Xiao Ping urged: «
get rich and glorious », thus freeing the en-
trepreneurial forces of this giant country. He
knew the force of the imitation motive, as a
lever of economic growth. Since then social
inequality between urbans and peasants has
grown. But luxury growth is a consequence
of it, not a cause: China has become luxury
N°2 marker in the world.
To summarize, luxury is criticized by SD
advocates not so much because of its ob-
jective impact on the planet resources but
because of its high visibility, and its consid-
erable symbolic power, much higher than its
real economic weight.
Acting as a SD model to pre-
serve luxury reputation
SD is not only an altruistic opportunity, it is
a business imperative for luxury. Celebrities
know they are opinion leaders and should
www.europeanbusinessreview.com 43
The European Business Review

act responsibly as such. They now demonstrate ethical concerns and

substitute an ethical stratification to power stratification. Cautious of
not endorsing brands that insufficiently « eco clean » or sustainable
that would hurt their own reputation, they stimulate fast change.
In fact all luxury groups have already made structural decisions
about this, either by creating cross categories Environmental Task
Forces, or through Charters that make SD an inherent criterion in all
decisions. LVMH initiated an Environmental charter as early as 2001
and SD is inseparable from its strategy. Like many others LVMH has
been auditing its carbon imprint since 2004 and has taken as a mana-
gerial motto the four words: renew, recycle, reduce, review. The same
holds true for Tiffany, a pioneer in that respect. One cannot buy gems
and not care about mining conditions.
Real luxury brands have always created new extremes for quality.
They set their own standards, superlative ones. These standards will
have to be higher in new ways now: the quality of a diamond cut
should not obliterate the mining conditions. Soon through internet,
bloggers rumors will reveal the real conditions behind the lustre (at
the sourcing level, or at the production level). Because luxury brand’s
very high gross margins do rely strongly on their intact lustre and im-
maculate integrity (Tabatoni et al., 2010), they have more to lose from
any reputation crisis. "Sustainability is our most important de-
Is SD ready for luxury standards? sign; Nature is our best designer." Tiffany
In practice, how do we reconcile the demands of frugality, self restraint views as a moral obligation to protect the
and the built-in dimension of luxury: is it, utmost quality, creativity, places and communities where their pre-
freedom, lack of constraints, excess of care? Should one ask John Gal- cious material comes from.
liano to divide by two the quantity of fabrics he is using, at each cat-
walk show? Should all fashion luxury brands adopt a minimalist look,
thus losing all capacity to differentiate and surprise? What about Jae- Today sustainability creates difficulties to maintain the level of
ger Lecoultre's use of rare dogfish skin for their wristwatches, which superior quality of premium brands. Created in 1933, the best polo
cannot be found in seafarms? At the retail level, should Cartier cut shirt in the world, Lacoste 12x12, owes its reputed quality (softness,
the air conditioning in their luxury boutiques or stop wrapping their durability, resistance to repeat washing) to the exceptional pima cot-
watches in a nice gift packet? ton from Peru. Its long fibers are used in making the 25 kms of thread
In the tourism business, a modern three star hotel is more energy needed for each Lacoste polo shirt. Buying cotton from sustainable
efficient than a Scottish castle. Should one destroy these castles? trade would certainly demonstrate that Lacoste does actively contrib-
The question of the compatibility between SD and luxury is the ute to the enhancement of the economic level of local producers in
same as the question concerning fair trade. We know the answer to- emerging countries: this would be an ethical achievement. However
day. For instance, AlterEco, a brand of fair trade chocolate soon real- Lacoste would not be Lacoste anymore: at this time, sustainable cot-
ized that fair trade could not be consumers’ N°1 reason for purchase. ton does not deliver the same quality and performance than Pima
A chocolate tablet had to taste very good, first and foremost: fair trade cotton. In addition, no single source produces enough of it. Lacoste
could not be an excuse for a less than satisfying palate experience. would have to buy ethical cotton from many suppliers in the world
One should not under evaluate the practical difficulties or remain thus introducing heterogeneity in the look and feel from one polo to
purely dogmatic. Two examples will illustrate the problem of compat- another.
ibility. In skin care, innovation is of paramount importance, as well as However all luxury brands do advance fast to meet the demands
preserving the health of the clients. Luxury is about excellence: more of SD. Let’s take a Dior (LVMH) handbag as example:
than any other, luxury brands guarantee zero risk. Now there are more • it is made in Italy (for this country is reputed for its excellent leather
and more pressures from lobbies and animal defence groups to for- suppliers and their know-how. Also it produces less CO2 than if it was
bid testing new molecules and skin care products on animals. But made in China as Coach does.
then how can any brand ensure that its radically new products in the • these better leathers come from Italian bio farms,
future are harmless if they have never been tested? When Stella Mc • once sold, the bag is put in a « cover », then in a box, both being
Cartney launches her new bio organic cosmetic line, how can she be recyclable,
sure that it is really hypoallergenic and will not harm to client’s skin if • it is presented in catalogues (the main part of a communication
it has never been tested? She cannot. budget in luxury is edition) with superior quality paper –coming from

44 November - December 2010

sustainable forests. Soon it should be replaced by online catalogues.
Thierry Mugler recent fragrance Womanity advertises its taking
care of the carbon imprint. This brand now sells refillable products.
Dior cosmetics decided to forbid the use of silicons in their products.
Doing so they knew these products would lose the experiential ben-
efit of silicons: the soft touch and feel impression.
Tiffany is another example of taking SD very seriously. Looking at
their brand website, one reads the Tiffany Commitments (Sustainabil-
ity is our most important design; Nature is our best designer). Tiffany
views as a moral obligation to protect the places and communities
where their precious material comes from. As a result Tiffany does
care about:
• the source of their gems and the mining practices: they do not buy
Burmese rubies
• deals with countries – only those who have signed the Kimberly
process
• local communities: they support the Alaskans pledge for no mines
there. Tiffany signed the Bristol Bay Protection Pledge
• large scale mining
• collaborative efforts
• not using real corals since 2002
• energy conservation
• recyclability: 95% of the paper for catalogues is certified by the For-
est Stewardship Councils as well as the Iconic Tiffany Blue Bag (FSC
certified, plus biodegradable, recyclable plastic film).
Another example Fauchon, the luxury grocery store in Paris, has
stopped selling counterseasonal fruits and vegetables (buying sum-
mer fruits in winter) because they came from the other side of the
planet and so were a CO2 imprint disaster.
How SD needs a luxury strategy too
There is a domain where SD now feeds the luxury dream itself: tour-
ism. Today the utmost rarity is unspoilt nature. But there would be
a dramatic contradiction in visiting such places and polluting to go
there or while living there. This is why new hotel chains have emerged
where SD is itself the dream, like Explora in Chile with resorts in Ata-
cama desert, in Patagonia and in Rapa nui (Eastern island). Their ho-
tels have fully positive energy buildings, with no litter (everything is
destroyed through organic bacterias) and food comes from the lo-
cal peasants. In addition they work only with the local community,
sponsor local education for their children and engage in actions to
compensate the carbon imprint of travelers coming there by plane. It
costs on average 1000 US dollars per night, one month of a worker’s
pay. This raises a question: is luxurious ecology still in line with the
social ideals of SD, ecology as natural socialism? What good does it
To remain a leader versus mass-goods,
and fashion, luxury will have to be sus-
tainable in social, economic and eco-
logical terms. It is built in its genes and
business model.
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do to all the inhabitants of the planet? Well, as ever luxury shows the
way! A luxury strategy aiming at the riches is the best way to intro-
duce and test new ecological behaviors and products in a market,
thus stimulating imitation by less affluent people when prices go
down thanks to lower production costs made possible by volume.
SD needs luxury too!
Status redefined : from power to altruism
Luxury can lead the way by redefining the notion of quality and the
luxury dream, no more a selfish individual one, but one that takes
into account environmental concerns. To remain a leader versus
mass-goods, and fashion, luxury will have to be sustainable in social,
economic and ecological terms. It is built in its genes and business
model. As a result luxury groups will bear upon their providers and
distributors to accelerate behavioral changes and align faster with SD
standards. By doing so they will play a leading role in the redefini-
tion of the modern hero. The rich of tomorrow by their conspicuous
choice of luxury brands will demonstrate not only their taste and
wealth but their sense of discernment and altruism.
About the author
Jean-Noël Kapferer, is reputed as world academic expert on luxury.
Professor at HEC Paris, Europe’s premier research center on Luxury,
he holds the Pernod-Ricard Chair on the Management of Prestige
Brands. With his co-author V. Bastien, former CEO of L.Vuitton, he has
published The Luxury Strategy, now the reference book on the spec-
ificity of a luxury strategy, often confused with trading up or fashion
strategies. He holds executive seminars on the luxury strategy in the
USA, China, Japan and Korea.
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