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DEPARTMENT OF BUSINESS AND MANAGEMENT

Bachelor’s Degree e in Economics and Business Chair of Management

RESPONSIBLE AND SUSTAINABLE LUXURY:

THE STELLA MCCARTNEY CASE Supervisor Candidate Prof.ssa Francesca Vicentini Elisabetta Elena Marchiolo

ID. 211121

Academic Year 2018/2019

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INDEX

INTRODUCTION ............................................................................................. 4

1. CHAPTER ONE – THE RELEVANCE OF CORPORATE SOCIAL

RESPONSIBILITY

1.1 Definition of CSR and its evolution ........................................................... 6

1.2 Why do companies engage in CSR? ........................................................ 13

1.3 CSR and the Triple Bottom Line (TBL) ................................................... 17

1.4 The growing importance of CSR in the luxury industry ........................... 29

1.4.1 The CSR model in the textile and clothing industry ........................ 32

2. CHAPTER TWO – LUXURY AND ITS COMPLEXITY

2.1 The general concept of luxury and its history .......................................... 34

2.1.2 The product/brand concept of luxury .............................................. 37

2.2 The three macro-segments constituting the luxury industry ..................... 39

2.2.1 The segmentation of luxury demand ................................................ 41

2.2.2 The luxury market ........................................................................... 49

2.3 The luxury marketing mix ....................................................................... 53

3. CHAPTER THREE – SUSTAINABILITY IN THE FASHION LUXURY:

The Stella McCartney case

3.1 The importance of sustainability ............................................................. 63

3.1.2 Sustainability in the fashion luxury ................................................. 66

3.2 The Manifesto for sustainability in Italian fashion ................................. 71

3.3 Stella McCartney: The pioneer of sustainability ..................................... 76

3.3.1 Respect for people: Social Sustainability ........................................ 77

3.3.2 The supply chains, supplier audits, training and improvement ........ 78

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3.3.3 Measuring and reducing the brand’s impact ................................... 79

3.3.4 The 2016 EP&L results................................................................... 80

3.4 Moving from waste to circularity ............................................................ 81

3.4.1 Circular solutions ........................................................................... 83

3.4.2 Respect for nature............................................................................ 83

3.4.3 Respect for animals .......................................................................... 85

CONCLUSION ................................................................................................ 87

REFERENCES ................................................................................................ 89

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INTRODUCTION

For many years, the concepts of sustainability, synonymous with environmental,

economic and social responsibility, and luxury, characterized by high quality and

extremely high prices, were considered as an opposition, or at least as a non-

compatible relationship. Primarily, this is due to the top price sector of the fashion

industry, which adopted business models that gave little space to sustainability.

Anyway, during the last years, society experienced a profoundly changed context,

motivating and forcing luxury companies to engage in more sustainable and

responsible activities. A crucial evolution in fashion dates back to the Third

Millennium due to the emergence of new trends from the demand side. Living still

relegated to traditional features such as quality, creativity, expertise, and savoir-

fair, consumers started to search for new forms of luxury, showing increasing

respect for natural resources and human beings. During the 1990s, in fact,

environmental and social issues took an utterly new valence sensitizing fashion

companies and pushing them to be concerned with these problems. But how could

fashion and sustainability, such distant concepts coexist?

Obtaining a luxury product characterized by expensiveness, high quality and low

environmental and social impact is not that easy. It is here where the revolution in

the luxury industry takes place. The luxury industry is experiencing a process of

self-analysis and redefinition of competitive strategies in the light of Social

Responsibility and sustainable dimension. The purpose of my analysis consists in

treating the theme of luxury fashion through the filter of Corporate Social

Responsibility (CSR) and sustainability, going to investigate more specifically how

it is possible to find a compromise between respect for the environment and luxury

brands. More precisely, the first chapter will deal with the importance of CSR, as

the basis for sustainable development in the luxury industry. It will describe its

definition, meaning, and evolution, the reasons why companies should engage in

CSR and several models, such as The Triple Bottom Line related to it. Nowadays,

CSR is becoming an inevitable priority for businesses, considered a set of aggregate

components whose value creation is shared and made advantageous to all

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stakeholders. Concerning the luxury industry, CSR seems to be fundamental for its

development, incorporating the attention toward the territory and the community in

which companies operate. It respects and protects the environment, supports human

resources and safety, and protects health and working conditions.

The second chapter will describe the concept of luxury in detail, its history, and its

interpretation. More specifically, presenting both negative and positive features, the

complexity in defining the notion of luxury will be treated. Secondly, an analysis

of the three macro-segments constituting the luxury market, followed by a

segmentation of luxury demand will be made. In this respect, to understand how

the luxury demand is shaped, and how it influences the luxury market, 12 different

segments of consumers will be classified. Fourthly, an analysis of the recent

developments and future outlook in the global luxury goods industry will be made.

In conclusion, the third chapter will depict the concept of sustainability, firstly in

general, and afterward applied to the luxury industry. In detail, the primary meaning

of sustainability is strictly related to the ecological dimension, but also respect for

the health and conditions of the workers as well as consumers and human rights.

Finally, sustainability has also a strategic connotation attached to the pursuit of an

improved quality of life and a conscientious behavior toward the community. When

analyzing sustainability in relation to luxury, it will emerge that the production of

a sustainable luxury good is considered an added value, which further enforces the

exclusivity of the brand, developing into an element of competitive advantage and

differentiation. The chapter also includes an analysis of the three R’s: Reduce, Re-

use, recycle concept, and a section entirely dedicated to the Manifesto for

sustainability in Italian fashion: a detailed study based on ten salient points helpful

for the designation of a responsible and sustainable fashion as well as guidelines

for the adoption of conscientious management models. Lastly, the study will apply

all the theories and principles explained as far by laying out the glaring case of the

Stella McCartney fashion brand: pioneer of sustainable luxury.

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Chapter 1: The relevance of Corporate Social Responsibility

1.1. Definition of CSR and its Evolution

The definition of enterprises has changed opposing to the neoclassic theory,

according to which they were considered as isolated and monolithic entities.

Today, companies are instead seen as institutions, which regulate social relations,

but also able to influence those outside the firm’s boundaries. They are considered

a set of aggregate factors whose value creation becomes mutual and advantageous

for all stakeholders. Therefore, business decisions must benefit the company as

well as the various components in which it operates. Moreover, customer’s

consumption habits have changed over time. Thanks to the development of new

technologies, starting from the 1990s it has been possible to quickly transmit and

use information, allowing customers to become aware of the deeds in real time. In

light of this, the attention brought to Corporate Social Responsibility has been also

a strategic move since it has enabled firms to strengthen their relationship with

customers. But how are customers affected by it? Since CSR is a component, which

increases the firm’s Corporate Reputation, it directly affects customers’ purchasing

decisions. Additionally, environmental and social concerns are becoming an

increasing matter, thus, firms are put in front of an ever-increasing clientele

interested in respecting environmental standards. As a result of the above

considerations, CSR has emerged as an inescapable priority for business leaders in

every country. For about thirty years, corporate executives have strived with the

matter of the firm’s responsibility to its society. Initially it was argued by some that

the corporation’s unique responsibility was to maximize financial returns to its

shareholders; however, it soon became apparent to all, that this quest for financial

gains had to mop up the country’s law. Thanks to social activist groups and others,

throughout the 1960s, the message was indelibly clear as a result of the creation of

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the 1Environmental Protection Agency (EPA), 2the Equal Employment Opportunity

Commission (EEOC),3 the Occupational Safety and Health Administration

(OSHA), and the 4Consumer Product Safety "Commission (CPSC). These

governmental bodies implied that national public policy officially recognized the

environment as well as employees and customers to be compelling and legitimate

of businesses. From then on, company’s executives have tackled with balancing

their commitments to the owners of companies with their obligations to a wider

group of interested parties claiming both legal and ethical rights. Literature contains

various interpretations on what does it mean for a corporation to be socially

responsible, trying to establish an agreed-upon definition for it. For many years,

the concept of Corporate Social Responsibility has progressed, already during the

1930s for instance, 5Wendell Willkie affirmed that CSR 6“helped educate the

businessman to a new sense of social responsibility. Conventionally, the modern

age of Social Responsibility can be marked by 7Howard Bowen’s 1953 publication

of “Social Responsibilities of the Businessman”, as it is argued that it is the first

work in which it is possible to trace the ethical foundation of the contemporary

notion of CSR. Bowen is in fact defined by some as the father of CSR since he

describes economic actors as morally bound to promote desirable economic

policies and behaviour practices for society. After Bowen’s publication many

works such as Cheit’s and Mason’s played a part in developing the Social

1 A US federal government agency responsible for the protection of human health and the environment, with prevailing regulatory tasks and the application of laws approved by the Congress. 2 A federal agency owed with enforcing laws prohibiting job discrimination. The EEOC complaints the discrimination and pursuit to settle them when discrimination is found. If charges can’t be settled, the EEOC can file a lawsuit on behalf of the individual or the general public. 3 OSHA is devoted to assuring safe and healthy working conditions for men and women. 4 It is a U.S. government agency protecting the American public from products at risk of presenting safety hazards. 5 Willkie was a US politician, president of the Commonwealth and Southern Company (1933); democratic, opposed to the more restrictive measures of freedom of enterprise imposed by the New Deal, passing to the Republican party. 6 Cheit, 1964, p.157, citing historian William Leuchtenburg. 7US economist, he worked as chief economist of the American Ministry of Commerce. In the field of applied research, it was noted above all for studies on the nature of public goods and on collective choice mechanisms, aimed at determining optimal production levels (voluntary theories).

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Responsibility concept. However, at this stage, the company does not yet appear as

the main subject of the investigation; a large part of the studies of these years

identify, in fact, in the figure of the economic actor the subject to whom the social

responsibility of his actions is attributed, while the main object of the research

concerns the relationships between the business world and society. In 1960, Keith

Davis described CSR and it became a common definition in the management

literature. According to him, CSR concerns the firm’s consideration of matters that

go beyond the narrow economic, technical, and legal requirements of the firm. the

When making decisions, firms should be committed to consider the impact of their

actions on the exterior social system, with the ultimate goal of improving society’s

welfare as well as economic profits. Thus, it emerges that social responsibility

begins as the law ends. A real debate undergo in 1962, when people began to discuss

social responsibility and the relationship between market and society, the economist 8Milton Friedman set himself to defend the free market by asserting that the sole

social responsibility of the company consists in "using its resources and engage in

activities aimed at increasing one's profits provided that it remains within the rules

of the game, which is tantamount to claiming that it competes openly and freely

without resorting to deception or fraud."9Joseph McGuire, in 1963, recognized the

primacy of economic concerns, but also accommodated a deeper view of a firm’s

social responsibility. He postulated that the notion of social responsibilities implies

that corporations not only have economic and legal obligations, but still clear

responsibilities to society. In 1967, the company appeared for the first time

associated with the definition of social responsibility, in the book of 10Clarence C.

8 He was a US economist, active during the Second World War at the Commission for Natural Resources at Washington and the National Bureau of Economic Research, giving its contribution in the study of financial problems with the US Treasury 9 Joseph W. McGuire, Ph.D., is Dean of the College of Commerce and Business Administration and Professor of Industrial Administration at the University of Illinois. Dean McGuire’s book “Business and Society” was voted by the McKinsey Award by the Academy of Management as among the five best books in Business published in 1963. 10From 1963 until 1969 he was a General Studies dean. He then became president of The Catholic University of America, a position he had until he retired in 1979. Walton then joined The American College, where he became the college's first professor of ethics. He was frequently named "the father of business ethics."

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Walton, entitled Corporate Social Responsibilities. According to Walton, the notion

of social responsibility recognizes the intimate link between the company and

society and forces economic actors to consider this link in economic operations.

One of the first appeals encompassing both economic and non-economic concerns

in defining social responsibility was the “three concentric circles” approach

proposed by the 11Committee for Economic Development (CED) in 1971. The inner

circle contains basic economic functions and the well-defined responsibilities for

an efficient execution of them such as products, jobs and growth. The intermediate

circle instead suggests that firms must be responsible for exercising the economic

functions with sensitive awareness of changing social values and proprieties in

respect of for example relations with employees, hiring and environmental

conservation. Finally, the outer circle draws emerging and still vague burdens the

business should consider in order to turn into being further vigorously participating

in the improvement of the social environment. Figure 1: The three concentric circles

Source: Committee for Economic Development (1971)

Thus, it is during the seventies that the notion of social responsibility becomes more

specific and the role of the company as a responsible economic actor towards the

company is more in-depth; these are the years in which the transition from social

responsibility to CSR takes place. In 1976, 12H. Gordon Fitch defines CSR as the

ability of the company to solve social problems, thus placing the emphasis on the

11 Born in 1942, the Committee for Economic Development of The Conference Board (CED) is a non-profit, nonpartisan, business-led public policy organization that delivers well-researched analysis and reasoned solutions to the nation’s most critical issues. 12 Professor at the University of Kansas

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distinction between social problems and economic issues. The relationship between

companies and society is further developed in 1979, when 13Carroll offers a

definition of CSR that overcomes the mere idea of profit and obedience to state

laws. According to Carroll, CSR expresses all the economic, legal, ethical and

discretionary expectations of society towards the company.

Thus, the CSR consists of 4 parts: economic, legal, ethical and voluntary or

philanthropic. It is from these 4 levels that its pyramid of CSR is formed, a theory

destined to remain in the imagination of sector research.

Figure 2: Carrol’s pyramid of Responsibilities

Source: Own Elaboration

The first and foremost liability of a company lies at the bottom of the pyramid and

concerns economic responsibilities; the business institution is responsible for

producing goods and services, which the society will desire and to sell them with

the aim of maximizing profits. Society pretends those behaviours from firms.

Secondly, Legal Responsibilities represent the laws and regulations promulgated

by federal, state and local governments under which companies are supposed to

13 Archie Carroll served for 40 years on the faculty of the Terry College of Business, University of Georgia. He is part of the board of various companies, institutions and bodies that deal with responsible and ethical business management, while his research and teachings range from moral leadership to non-profit management, to stakeholder theory. He theorized the "pyramid of Corporate Social Responsibility" for a moral management of organizations' stakeholders.

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operate. Society requests a behaviour in compliance with the law and legal

requirements from companies while fulfilling their economic mission. Thirdly,

Ethical Responsibilities encompasses additional attitudes and exercises, which

aren’t eventually embodied into law but anyway they are expected from society.

They embody standards, norms, or expectations, which represent a concern for what

customers, employees, shareholders, and the community in general considers as

fair, right, or in recognizing respect and care of stakeholder’s moral rights. Ethical

responsibilities are the most challenging for businesses because they are fairly

vague, anyhow, they have been recently discussed and stressed continuously.

Finally, Philanthropic Responsibilities consider corporate actions in response to

society’s desirers that business be good corporate citizens. Similarly, to Ethical

Responsibilities, society has no specific idea of which these responsibilities are,

basically, they depend on individual judgment and choice. Carrol also expressed

his concern by saying that perhaps it would have been not appropriate to call these

expectations “responsibilities” since they are at businesses’ discretion. These

activities may include donations of goods and services, volunteer activities, the

company's involvement in the community or its employees or stakeholders.

Philanthropy includes those corporate actions that meet society's expectations that

companies are good companies. This includes the effective engagement in actions

or programs to promote the well-being or the human good will.

Only in the following twenty years, however, was the notion of CSR reworked from

a conceptual and theoretical point of view. Since the 1980s, CSR has been the

subject of interest from the social and economic sciences; in particular, the

company and the issues related to social responsibility take a central position in

business ethics. Furthermore, the major empirical studies aimed at testing the

performance of corporate responsibility date back to the 1980s and 1990s. The first

and most relevant regulatory response is the stakeholder theory, first formulated by 14Freeman in the early 1980s. A current definition comes from the European

Commission (2010), which defines CSR as a conception where companies

14 He is an American philosopher and teacher, currently a professor of business administration at the University of Virginia's Darden School of Business.

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voluntarily combine social and environmental issues in their business operations as

well as in their synergies with stakeholders.

Besides the several definitions of CSR, there are many terms for the same or similar

construct. The prevailing term used in addition to corporate social responsibility is

‘‘corporate sustainability”. This emerged in the middle of the 1990s in the literature

on business ethics because of the belief that the inquiry on sustainable development

should involve firms as well. Corporate sustainability focuses mainly on the long-

run shareholder value through the fusion of principles divided into nine areas:

governance, ethics, business relationships, transparency, financial return, product

value, community involvement, employment practices, and environmental

protection. Corporate Social Responsibility entails several corporate activities,

which focus on the welfare of stakeholder groups other than investors, such as

employees, suppliers, customers, charitable and community organizations or future

generations. Since charitable and community organizations are extremely

important, companies also allow their employees to take time off from work in

order to undertake volunteer activities. Employee welfare and safety are another

building block of CSR. Concerning employee’s welfare, several measures are

undertaken such as provisions of educational benefits, health support, fitness

centres and onsite health clinics. Similarly, workplace safety is another critical

factor of employee welfare. In this respect, several companies have codes of

conduct providing requirements for fair and safe working conditions for employees,

audited by independent experts in order to ensure that everybody adheres to these

codes. Customer’s desires and future generation’s protection and consumers’

concern as about the humane treatment of animals is something imperative for CSR

activities, too. Other activities in the lenses of CSR include the use of green

production practices, such as conserving energy, reduced emissions, use of recycled

materials, reduction of packaging materials, and sourcing materials from vendors

located geographically close to manufacturing facilities.

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1.2. Why do companies engage in CSR?

There are numerous reasons for why firms decide to engage in CSR activities, in

this regard, the literature on this matter is described from a vast amount of

perspectives and under several names. For this reason, being very difficult to

provide a complete overview of all reasons for engagement in CSR activities, this

section will analyse some of the most recurring and important ones.

1. Economic Reasons; these reasons link to the basilar principle of 15profit

maximization, however, this is often not considered as the main reason itself.

In the literature of CSR this principle is rephrased as “The business case”,

indicating how profits could be increased through engaging in CSR initiatives.

The business case of CSR states that the returns of a social or environmental

investment or initiative are greater than the costs associated with it. This theory

considers companies as rational actors with activities driven solely by efficiency

and profitability, which is in accordance with the view of firms in 16microeconomic theory. Furthermore, the CSR proponents of the economic

drivers point out that firms engage in CSR since they perceive the engagement

creating benefits that exceed the costs, and accordingly the business case

interprets the same idea as the economic principle of profit maximization.

2. Direct economic profits; in some circumstances CSR represents a strategy for

profit maximization as well as the creation of direct positive impacts on profits,

by either increasing revenues or reducing costs. Such benefits tend to occur

during the 17short-run usually. By improving for instance environmental

practices, it is possible to make direct economic profits; a striking example

could be a company, which incurs lower production costs as a consequence of

investing in cleaner and more efficient production technologies. This

consequently implies higher profits, simultaneously as improving its

15 The ability for company to achieve a maximum profit with low operating expenses. 16 The social science that studies the human’s decisions concerned with the employment and disposal of scarce resources. Microeconomics demonstrates the rational of goods’ values, individuals’ decisions .regarding efficiency and productivity, and the coordination and cooperation of individual’s relations with one another. 17 A certain period in the future, at least one input is fixed while others are variable.

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environmental performance. In addition, engaging in improved environmental

practices enables a company the eligibility for eco-subsidies from the

government. Another way of creating financial profits of the firm is described

by Prahalad & Hammond's 18"bottom of the pyramid" concept, represented in

the figure below. The idea is that a company targets a poor undeveloped market,

called the BoP, and supply this market with goods that initially were not

available for the poor consumers in this market. Consequently, a new market is

created for the company's products, hence greater income and revenue for the

business, simultaneously as the new costumers receives the opportunity to

engage in consumption and production, which can help the poverty-stricken

society out of poverty. Figure 3: The World Economic Pyramid

Source: Prahalad, C.K. and Stuart L. Hart, “The Fortune at the Bottom of the

Pyramid”, strategy business, Issue 26, first quarter 2002

3. Investors; given the increased concern about CSR issues by a huge public,

nowadays there exist a large and growing number of shareholders on the stock

market who consider ethical considerations extremely relevant in their

investment decisions. In fact, from a survey done in 1994, it emerges that 26

percent of potential investors in the United States said social responsibility was

extremely important in making investment decisions, and 25 percent of current

investors said they always check on values and ethics before investing. Those

investors become as a consequence very attractive for companies. Companies

18 A concept, which consists in dividing the world into an economic pyramid by keeping the privileged on the top and unprivileged poor at the bottom.

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may find investors sharing these values extremely attractive. Accordingly, in

order to comply with criteria for social funds this can conceive a supplementary

approach of retaining capital. Furthermore, in the case in which demand for

socially responsible firms’ stocks goes up, then the prices of these stocks are

predicted to raise, permitting to these companies to be in a favourable position

in respect of less responsible competitors.

4. Employees; a more responsibly managed firm will face fewer business risks

than its less virtuous competitors and will have an advantage in attracting and

retaining committed employees. In this respect, CSR advocates frequently that

more responsible firms enjoy a comparative advantage in attracting and

retaining motivated employees. Some believe that a strong reputation for

corporate responsibility can help firms to lower their personnel costs because

people who want to work in responsible companies will be willing to do so

despite lower wages.

5. Consumers; an important question to be asked is to what extent do consumers

prefer the socially responsible products over those produced negligently?

According to several studies, consumers place high value on corporate or

environmental performance during their purchase decisions. A 1995 study by 19Cone Communications reported that 31 percent of those who answered

considered the company’s sense of social responsibility as a decisive factor in

their purchasing decisions. About 90 percent of the consumers surveyed by the

Walker Group said instead d that in the case in which quality, service and price

are the same they’re choose to buy from companies having the best reputation

for their social responsibility. Anyway, these results are similar also in Europe,

where in fact a 1997 survey found that 71 percent of French consumers would

choose a “child-labour-free” product even if it were more expensive than the

alternatives. Thus, many analysts have concluded on the basis of such evidence

that a company’s reputation for social responsibility can affect sales. It is then

19 A public relations and marketing agency recognized as a pioneer in cause marketing and corporate social responsibility.

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straightforward that CSR needs to be implemented in order to attract customers

and respond to the pressures provoked by them. Communication to customers,

branding and reputation become imperatives as a mean to create a competitive

advantage toward less responsible firms. CSR has the potential to be managed

as a vehicle for the brand’s reputation enhancement and development with the

ultimate goal of attracting customers. If companies are behaving in a manner

not considered responsible, customers embrace the potential to punish them. As

Kendall, Gill & Cheney (2007) affirm in their work Consumer Activism and

Corporate Social Responsibility, there are many strategies for consumer

activism, for both individual and collective conscientious consumption, that can

force companies to act more responsibly. Among these actions there are a

selection of internet-based options, phone calls, letter writing, petitioning, the

creation of alternative venues for consumption, the participation to boycotts and

boycotts and social movement alignment. Due to the increasing effectiveness

on corporate behaviour of these actions, it can be proclaimed that modern

consumerism presents a prospect for political action.

6. Avoidance of governmental regulation; as a consequence of the strong emphasis

put on the 20free market during the 1980s, such as deregulations and

privatizations of state-owned companies, governments lost some of their power

while businesses gained it also due to the effects of the globalizations.

Nowadays, the fact that governments are not the only companies’ regulators,

indicates an additional strain for focusing on the demands of CSR. As 21Kenneth

W Abbott and 22Duncan Snidal disclose, today’s power is split in a "government

triangle" of firms, non-governmental Organizations (NGOs), and the state.

Citizens are better educated, more affluent and better informed, hence more

attentive to the punishment and check on corporate excesses in respect of the

past, when customers had lower expectations and/or were more tolerant toward

20 An economic system in which prices are determined by unrestricted competition between privately owned businesses. 21 Jack E Brown Chair in Law Emeritus, Professor of Global Studies, in Arizona at the State University. 22 Professor of International Relations, Nuffield College, University of Oxford

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corporate behaviour. Thus, CSR engagement can steam from a contextual

situation where the influence of civil society increased, as governmental power

has been reduced and company power has risen. Moreover, CSR could

represent a procedure for avoiding future bureaucratic regulation.

Unequivocally, voluntary regulation from a corporate perspective over a

governmental one would be favoured. Adopting CSR as a mean of voluntarily

regulating themselves, companies would be able to deter legislation and

constitute or cultivate a greater corporate autonomy from the government.

According to Sadler, for some companies CSR can even be a mean of keeping

their license to operate. Sadler explains that the international trend towards

privatization in the UK has made utilities, public transport, telecommunications,

etc., privately owned. Regulators or named authorities are in charge of auditing

the guidelines of service in public interest, and if it is discovered as insufficient

operating licenses must be revoked or not renewed. Notwithstanding the diverse

reasons CSR engagement, it is forthright that different companies will engage

for other motivations. Each region, country, and community have in fact a

different combination of drivers.

1.3. CSR and The Triple Bottom Line (TBL)

Almost all CSR theories admit that the foundation of the idea lies in the Triple

Bottom Line (TBL), a concept which has been introduced in 1987 by the 23Brundtland Commission and officially named in 1994, by 24John Elkington. The

famed British management consultant and sustainability guru coined the phrase as

his way of measuring performance in corporate America. A TBL seeks to measure

a corporation's level of commitment to corporate social responsibility and its impact

on the environment over time. The suggestion consists in managing a company in

not only aiming at earning financial profits, but also at the improvement of people’s

lives and the planet. In fact, a company should be responsible for three important

23 The aim of the Brundtland Commission was to help direct the nations of the world towards the goal of sustainable development. The commission is also known as the World Commission on Environment and Development (WCED). It operated from 1984 to 1987. 24A world authority on corporate responsibility and sustainable development.

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elements: Profit, People and Planet, thus, economic, social and environmental

responsibility. According to TBM theory, since these features are closely related, a

company can be named a sustainable one only if it attentively and simultaneously

works on these three bottom lines.

Figure 3: The Triple Bottom Line’s components

Source: University of Wisconsin, Sustainable Management

1. Profit

Clearly making profits is a mandatory requirement in order for companies to

develop and survive in the market and possibly leads to certain measures committed

to responsible behaviour. The most important task of making profit is to use it in a

good manner. Uddin et al. explained in a paper that the economic dimension of CSR

is more concerned with the direct and indirect impacts of company’s activities on

local communities and other stakeholders. Companies acting with a socially

responsible attitude can be profitable and save substantial costs in the long-term.

Therefore, a respectful society is more likely to avoid any adverse social

consequences and improve beneficial social outcomes. Furthermore, the

performance of this task can lead the company towards further expansion. The

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indicators of success in the global economic responsibility can be the 25Gross

Domestic Product (GDP) and 26purchasing power parity (PPP) - their growth is a

measure of business involvement in the improvement of living standards. The

positive change of society is linked to the success of companies. Cooperation with

stakeholders is crucial: The transparency and open relationships, stakeholders can

see the work of the company and decide if it is in harmony with their views. In the

figure below, aspects of economic responsibility are shown:

Figure 4: Components of Economic Responsibility

Source: Triple Bottom Line, the Pillars of CSR

According to Uddin et.al (2008) the economic dimension is declined in three

aspects; the Multiplier Effect, Taxes and the Avoidance of Actions that damage

Trust.

-The Multiplier Effect; this is particularly high when a large amount of people in

the area work for that company. The key is to consider the impact the company has

on its stakeholders, therefore local communities, employees, NGOs, customers and

suppliers. The greater the company's economic performance, the higher the wages,

25 It refers to the total monetary or market value of all the finished goods and services produced within a country's borders in a determined moment in time. It is considered as a comprehensive scorecard of the country’s economic health. 26 PPP is an economic theory that compares different countries' currencies through a "basket of goods" approach. According to this concept, two currencies are in equilibrium when a basket of goods is priced the same in both countries, considering the exchange rates.

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which are spent on products and taxes. From the company's point of view, higher

profits allow you to invest more money in socially responsible activities. In the end,

the company's biggest profits seem to benefit everyone in the community.

-Taxes; contribution through taxes is fundamental. The higher the profit, the fairer

tax is paid to the government, which can be spent for its people, helping society

with the most serious issues. Corporations are the main taxpayers on the local basis.

Uddin et al. (2008) propose to consider the taxes paid not as costs but as a part of

CSR’s contribution to society. This would make tax avoidance harmful to society,

as it means that companies do not want to share their success with the society.

-Avoiding actions that damage trust; the last aspect of economic responsibility is

evading any activity that offends trust. This has to do with the company's license to

operate. The reputation of a company, once destroyed, is very difficult to recover.

Many still remember the 27scandal of the 1970s that involved Nestlé and its formula

for children sold in third world countries, although the company has ample

resources in elaborate CSR actions. Those activities that could potentially endanger

the trust in society should be aborted and replaced with shares of confidence. The

most visible example can be corruption and corruption which, once discovered,

changes the way the company is viewed for a long time, if not irreparably.

2. People

People are the essence of a company. The social dimension is in fact based on

improving living standards. CSR is a tool that serves to establish and preserve good

relations between the society and business. This is an extremely important liability

in the relations of small and medium-sized businesses and local communities where

usually most of the workforce in the facility is drawn from surrounding areas, so

27 Nestlé S.A. or Société des Produits Nestlé S.A. is a multinational company active in the food sector, based in Vevey, Switzerland. During the 1970s, it was accused of getting third world mothers hooked on formula, which is less healthy and more expensive than breast milk.

21

the responsibility doubles: employees are at the same time the local community. As

a result, these companies have the possibility of being closer to society and

knowing, which the most critical problems are. However, the local community

includes not only the people living in that specific area but also all groups and

organizations that operate in the neighbourhood. Social responsibility means

engaged in taking care of the people involved in a company or whoever it is

concerned. In this sense, the company takes on the duty of ensuring the well-being

of people and invests in their abilities necessary for the hiring process. If there were

no workers, customers or supply chain participants, companies could not exist. The

previously discussed interdependence between companies and society is an

essential component of a company's daily life and no company can give it up and

continue to perform as if anything happened. Thus, economic expansion must go

hand in hand with social development. Companies that adhere and respect the

concept of Triple Bottom Line are those which do not exploit people, those who

oppose child labour and provide proper wages and fair treatments for its employees.

Moreover, those companies strictly control their subcontractors and verify that they

obey to the same rules. An example of excellence in the responsible management

of the company, in the enhancement of human capital, respecting and integrating

with the territory is represented by 28Brunello Cucinelli S.p.A., an Italian fashion

company specialized in the production of cashmere. Brunello Cucinelli has always

pursued an entrepreneurial model with an ethical and humanistic vocation, in which

part of the profit is reinvested in initiatives aimed at improving the condition of

workers and the community. Much attention is paid to values such as legality,

transparency, quality, sustainability and responsibility towards the community. In

the below sentence Brunello Cucinelli himself expresses fundamental concepts that

enclose the essence of his way of working and creating value. “The point of

reference in my organization is common welfare, as an instrument for the pursuit

of prudent and courageous actions. In my enterprise, I placed the man at the centre

of the productive process, because I’m convinced that only through the rediscovery

28 Brunello Cucinelli is an Italian fashion house founded by the homonymous entrepreneur, known for the production of fine cashmere knitwear.

22

of conscience, human dignity will be given back to us. Work elevates man’s dignity

and the affectivity, which derives from it.” Suitably more and more companies are

taking the direction of social progress. Managers make decisions to allocate a

certain portion of profits to contribute to society. In the figure below, the aspects of

social responsibility are shown.

Figure 5: The components of Social Responsibility

Source: Triple Bottom Line, the Pillars of CSR

According to Uddin et.al (2008) the aspects of social responsibility are declined in

three aspects; Responsibility towards Customers, Responsibility towards

Employees and Responsibility towards Community.

-Responsibility towards Customers; customers need to have confidence in a

company from which they decide to make purchases. Nowadays, many consumers

are particularly interested in the company’s out-of-business activities; they make

their purchase decisions according to which enterprise cares for them being aware

of the fact that their consideration is what makes companies profitable. Modern

customers are more careful when making their buying decisions today; the new

consumer prototype is an independent but concerned individualist in continuous

search for authenticity. Most importantly he or she is well informed due to the fact

that today’ consumers have access to the Internet being allowed to quickly find

information about the products they are going to buy, compare different goods,

prices and even producers before deciding which good to buy ion a conscious

23

manner. Thus, having a choice, most of the buyers tend to choose brands known for

their social responsibility, even if they have to pay larger amounts for ecologically

and socially friendly products. New consumers are not concerned with quantity but

with quality instead; as a result, he or she becomes a critic, expecting good quality,

but also a prominent service during the transactions and refined after sales service.

Tending to all customers’ needs is a potential driver of profitability.

-Responsibility towards Employees; hiring workers results as a beneficial thing for

people, anyway, this is not enough. CSR activities dedicated to workers are

responsible for ensuring the best use of their skills and abilities as well as the care

for their well-being. Moreover, companies must be making sure that all safety

measures are rigorously respected. According to this burden, as already mentioned,

several companies have codes of conduct providing requirements for fair and safe

working conditions for employees, audited by independent experts in order to

ensure that everybody adheres to these codes. Companies can also provide the

possibility of self-realization and devise outstanding systems of motivation for the

employees through the possibility of participating to training courses and more in

general education. Especially nowadays, a vital CSR policy consists in the impartial

treatment with no regard for gender, age or difference. In addition, adopting

diversity enhancement policies leads to the creation of an environment, which make

it possible to use the potential of unique competences of the company’s workforce

as well as to the improvement of the overall results not only of the single

organization but of the entire country: the 29Organization for Economic

Cooperation and Development (OECD) expects a GDP increase of up to 12% by

2030 for the Countries that will be able to achieve real gender equality. Among

other things it confirmed that the presence of a larger number of women in top

positions allows not only to improve the performance of the organization but also

29 The Organization for Economic Cooperation and Development (OECD) is a unique forum in which the governments of 34 democracies with market economies work with each other, as well as with more than 70 non-member economies to promote economic growth, prosperity, and sustainable development. The Organization provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and coordinate domestic and international policies.

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to better respond to the demands of a rapidly emerging market. The tools that can

be applied range from flexible working hours, working from home to job sharing

for leadership roles. A short passage taken from a 30Research Paper of ILO

Research Paper series, named "Working time and the future of work" briefly

explains the positive contributions and effects of reducing working hours.

Now is the time for action. The best available empirical evidence shows that the

reduction of full-time working hours, joined with basic guarantees regarding

minimum working hours for part-time workers, can lead to numerous positive

outcomes for workers, enterprises and society as a whole: fewer business health

problems and lower health care costs; more and better jobs; better work–life

balance; and more satisfied, motivated, productive employees resulting in more

sustainable enterprises. In addition, shorter working hours can even make an

important contribution to the “greening” of economies because the more we work,

the greater our “carbon footprint”; so, cutting back on the number of days that we

work – and therefore the number of times that we have to commute from our homes

to our workplaces – is constrained to deliver a positive impact on the environment

as well. Finally, the image the company presents to the local society is crucial to its

positioning against competitors.

-Responsibility towards Community; concerning the last element contributing to

social responsibility, the local community is one central sphere of interest of the

company. As a result of their business activities, companies automatically have an

impact on the communities in which they operate, primarily through employing

people and producing goods and services, which may involve the sourcing from

local suppliers and the selling to local customers. Yet, several companies interact

with the communities where they work in different ways, which are not directly

related to the traditional aspects of running a business. Actions taken by businesses

for the benefit of the local communities are many; focusing on some forms of

sponsoring local sporting or cultural activities such as financing the outfits of the

30 Established in 2012, the “ILO Research Papers” Series publishes research papers written by ILO staff, and also by external experts collaborating with the ILO. The papers are analytical and based on robust theoretical and/or empirical research.

25

local football team. But not only, these are also giving spare equipment to

community organizations, cooperating with local schools (e.g. company visits,

work experience placements etc.), using employees professional skills in voluntary

works, participating in local business networks in order to exchange experiences or

promote a common agenda, training, donations or simply recruiting. All these

activities share a common value, that is, they are companies’ voluntary involvement

or investment in the local community. The figure below indicates the main types

of companies’ local community involvement and the fields in which activities are

being carried out.

Figure 6: Responsibilities towards Community

Source: Oxford Research A/S, 2002

3.Planet

The planet represents the habitat of both companies and people in general. It is

straightforward that if large corporations pollute the environment with their wrong

decisions and actions and thus contribute to the planet’s destruction, these will be

negatively affected as other people, too. Protecting the natural environment is

something compulsory for everybody, especially for corporations, which are

unfortunately often the first reason for its damage. Corporations are responsible for

a great part of the negative impacts and environment’s contamination because they

26

may use natural resources irresponsibly, produce waste or emission of pollution by

products. There are diverse ways the business can become environmentally

friendly; firstly, it can make sure that its products do not harm the environment in

any way, however, even if it seems quite obvious, this is not possible for every

industry yet. An action, which could be universally taken by all companies is the

reduction of waste. In every company there are countless ways to reduce the amount

of use, think to the useless printing of e-mail or simply recycling. Moreover,

companies producing highly toxic waste should also take all necessary measures to

reduce the level of toxicity and show concern for an adequate and law-abiding

workload. Another solution that can be adopted in order to help the surrounding

environment lies in the reduction of the use of water and energy, such as teaching

employees to always turn off the light in rooms that are not used at the time. In

general, responsibility towards the environment delivers higher profits for the

company in the long run. It is also easier to measure the impact that the company

and its CSR policy have on the environment than on society. In the work of Uddin

et al. (2008) environmental responsibility is declined in two aspects: environmental

impact and the win-win situation. These are represented in the figure below.

Figure 7: Components of Environmental Responsibility

Source: Triple Bottom Line, the Pillars of CSR

-The Environmental Impact; this represents all the harmful effects the company has

on the environment as a consequence of its daily operations. Firms responsible for

the environment should therefore be able to measure their impacts on the natural

27

environment, such as using the 31Ecological Footprint, which measures the demand

and supply of nature. On the demand side, the ecological assets required by a given

population, in our case companies, in order to produce the natural resources, they

consume and absorb the waste produced, are recorded. These include plant-based

food and fibre products, livestock and fish products, timber and other forest

products or space for urban infrastructure. On the supply side instead, a city, state

or nation’s biocapacity represents the capacity of its ecological assets including

cropland, grazing land, forest land, fishing grounds, and built-up land. These areas,

especially if left uncollected, can also ingest much of the waste generated,

especially carbon emissions. Thus, this accounting measure is able to assess how

fast we consume resources and generate waste, by measuring the quantity of

resources used by the company during an entire year and examining it in contrast

to the supply of these resources in terms of how quickly nature can absorb waste

and generate new resources, thus how much of them are still accessible to the

planet.

Figure 8: The Ecological Footprint

Source: Global Footprint Network

31 It is a complex indicator used to evaluate human consumption of natural resources with respect to the Earth's ability to regenerate them.

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Another mean, which can be used in order to measure firms’ environmental

influence is the Life Cycle Assessment (LCA). LCA is a tool used to analyse the

environmental repercussions of a product, an activity or a process throughout all

phases of the life cycle. This happens through the quantification of the use of

resources, the "inputs" such as energy, raw materials, water, and emissions into the

environment such as "emissions" into the air, water and soil associated with the

system being assessed. When deciding to perform the LCA analysis of a product, it

is necessary to first identify the processes involved in the life cycle of each

component of the product and its packaging. Generally, the analysis considers: the

extraction and supply of raw materials, production, packaging, transport from the

production site to the point of sale use product and packaging disposal. Thus, the

measured impact of a company should be well managed, meaning for example

altering the way it used to work and implementing more planet friendly thinking

into company’s operations. An interesting example of using the LCA assessment to

manage the company impact on the natural environment in the clothing industry is

the case of Stella McCartney, which will be object of an in-depth analysis in the

third chapter. The luxury fashion brand commissioned the first ever Life Cycle

Assessment (LCA) for Man-Made Cellulose Fibre (MMCF) used in production.

The study concerned the environmental performance of ten raw material sources of

MMCF, carried out by third-party certifier 32SCS Global Services. Stella

McCartney undertakes activities such as the use of many eco-friendly materials

such as recycled polyester, organic cotton, and regenerated cashmere. They have

strategies aimed at the reduction of waste, in place across their entire supply chain,

and they measure and report on their greenhouse gas emissions, both direct and

indirect ones.

-The Win-Win of Environmental Responsibility; it represents circumstances in

which both sides benefit. The key lies in the fact that companies should be able to

32 SCS is an international leader in third-party certification and standards development in environmental, sustainability, and food safety and quality performance claims. Through auditing, certification, testing, life cycle assessment, training, and strategic consulting services, they help organizations affirm and communicate their sustainability success stories.

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adopt the advantage provided by the lately environmental management. Cutting

cost enable businesses’ viability through savings. In addition, companies are suited

to discover any anomalies in production thanks to a strict examination of the

processes, and eventually remove them, benefitting from lower risks. Finally, as we

already mentioned, all the environmental actions improve the company’s

reputation, therefore attracting customers, and may lead to significant competitive

advantage.

1.4. The Growing Importance of Corporate Social Responsibility in the Luxury Industry Tastes of luxury buyers mutated in time and have different priorities among them.

What we will try to do up to this moment is to understand how the luxury industry

applies the concept of CSR in its business strategy. Literature considers attention

to social responsibility implying that companies are constantly examining their

actions impacts on all stakeholders by coordinating their interest with the company

ones. In the last decades there has been faith in the fact that, contrarily to the

traditional economical and economic-business literature, economic and social goals

can coexist. More precisely, the social objectives could potentially become

important sources of competitive advantage. With regard to the luxury industry,

Corporate Social Responsibility (CSR) is having a determinant importance in the

last years. In fact, up to the 1970’s as environmental concerns began to take on

importance, luxury companies’ response was quite limited; they adopted

communication strategies through green marketing initiatives. From the 1990’s

instead, environmental and social concerns played a key role acquiring a completely

new value and companies began to be more sensible to such problems. These issues

not only incorporated a strong communicative value, they also influenced the

effective productive and organizational capacity of all companies. In conjunction

with the propensity to internationalization and innovation, Corporate Social

Responsibility seems to be an important driver for the development in the luxury

industry, as it incorporates all interventions of attention concerning the territory and

the collectivity in which companies operate, respect and protection of the

30

environment, support of human resources as well as safety and protection of health

and working conditions.

According to the definition given by 33Francesca Rinaldi and 34Salvo Testa in their

book “The responsible fashion company. Integrating ethics and aesthetics in the

supply chain”, in the fashion industry, “a durable balance can only be achieved if

short-term economic goals are integrated, being essential for the remuneration of

capital and labour, with other non-economic objectives that refer to the relationship

with the environment, society, culture, the media, institutions, legislation and above

all the dimension of ethical values. “For instance, 35Gucci recently declared that

they would interrupt the production or sale of goods made with animal fur. They

committed to auction all fur items they hold in their inventory and donate the

proceeds to animal rights organizations such as 36Lega Anti Vivisezione (LAV) in

Italy and the 37Humane Society of the United States (HSUS). Additionally, Gucci

is siding with the 38International Fur Free Alliance. Another example concerns 39YOOX Net-a-Porter Group, which as Gucci, announced that they would no longer

sell goods made with animal fur on their E-commerce sites. Even if these actions

seem to comply with social and environmental concerns, there are some discussions

on the fact that artificial fur may be less harmful to the environment than artificial

fur, due to the fact that fake plastic isn’t biodegradable, thus damaging the

33 She is an executive consultant for companies in the Fashion and Luxury industries, having acquired a practical expertise especially on brand management, digital strategies, business model innovation and sustainability. 34 He is a researcher of Business Economics. Professor of Fashion Management at Bocconi University, lecturer in the SDA Bocconi Strategy Area and Creator of the Fashion & Design Platform of the SDA Bocconi. 35 Founded in 1921, it is an Italian fashion house active in the high fashion and luxury industry items that is part of the Gucci Group, a division of the French company Kering. 36 Founded in 1977, it is Italian animal rights association. recognized by the Italian State as an association for environmental protection, a moral body and a non-profit organization of social utility. 37Founded in 1954, it is an American non-profit organization based in Washington, D.C., whose aim consists in addressing animal-related cruelties of national scope, and to resolve animal welfare problems by applying strategies beyond the resources or abilities of local organizations. 38It is an international coalition of more than 40 animal protection organizations working together to end the exploitation and killing of animals for fur. 39 It is an Italian company active in the online sales of fashion, luxury and design goods. It has taken on this name since October 5, 2015 following the merger between YOOX GROUP and THE NET-A-PORTER GROUP, two of the leading online luxury fashion companies.

31

environment as well as wildlife, because of the plastic and petroleum necessary to

produce them.

Jia Yun Wong and Ganga Sasidharan Dhanesh analysed the content of the CSR

messages of various luxury industry companies in their paper entitled "Corporate

social responsibility (CSR) for ethical corporate identity management". The

analysis took into consideration each dimension of the CSR message content

running a qualitative framework research and creating a detailed framework matrix

of each aspect. The study’s result was that luxury brands principally enclosed their

CSR efforts “as going beyond what is required driven by purely good-hearted,

altruistic motives. Additionally, the plan showed that the supported programs were

absolutely consistent with the firm’s core business values and the impact of CSR

activities was expressed in abstract terms evoking emotions over logic. James

Robertson’s made a review of Wong & Dhanesh’s research in 2018, outlining that

“CSR within the luxury world is positioned as altruistic and exceptional, rising both

the brand and the customer above the banality of the everyday through working to

improve the society”. Particularly, it could be possible to describe e the CSR

activities of most luxury brands as experiencing the phase of “CSR Reluctance”,

meaning that CSR is perceived as a constraint, without goals and ignoring social

responsiveness. Anyway, luxury brand’s behaviours are slowly moving towards

“CSR Cultural Grasp”, a situation in which CSR is considered as a value protector

of organizational goals, firms are particularly attentive to their reputation, tangible

results and to the adaption of existing processes during the short-term. In order to

have a complete picture of how CSR is combined with the luxury industry, the use

of the previously analysed Triple Bottom Line theory, which takes into

consideration also financial, social and environmental aspects, may be helpful. As

already explained, this process covers the entire production process of

transformation from the inputs to the outputs, as well as stakeholders’ network; this

is oriented towards a work-centric perspective, according to which it is not enough

to understand and respect the rules of the countries in which the factories are located

but needs and desires of workers must also be considered in a vision that is defined

32

as dynamic, because CSR in fashion is driven by the continuity of the action in

order to reach the objectives.

1.4.1. The CSR model in the textile and clothing industry

Through a study conducted within the education system in the world of textiles and

clothing, 40Marsha Dickinson, 41Suzanne Loker and 42Molly Eckman, arrived at

defining Corporate Social Responsibility within the T&C through three

dimensions, which try to include the entire associated stakeholder system to the

fashion industry and the product life cycle. Figure 9: CSR within the T&C industry

Source: Dickinson Eckmann, Loker 2009

In the figure above, CSR in the fashion industry is primarily represented by values

such as ethics and economic sustainability. As a matter of fact, the fundamental

dimension of CSR in the clothing and textile industry is based on a business activity

that “balances ethics and morality with profitability, which is achieved through

accountability-based business decision and strategies”. This dimension should

include the objectives that a responsible company intends to achieve, how it reaches

40 Professor and Chairperson of the Department of Fashion and Apparel Studies at the University of Delaware. 41 Professor at Cornell University. 42 Professor at Colorado State University.

33

them and finally the way in which CSR is integrated with the decision-making

processes and company policies. The second aspect is related to the company’s

orientation or focus towards the environment, people and society. A responsible

company is primarily interested in people’s welfare both as individuals and within

the society; at work, at home, in larger communities, being at the same time

interested to the environment. Ultimately, being a responsible enterprise requires

having a system largely focused on the interactions between people, processes and

environments involved in the process of production. The third and last element

refers to the outcomes: the scopes in which companies must put their effort in order

to improve their results. The areas of intervention are the reduction of pollution and

consumption, the creation of quality products, the consumption of fewer resources,

the sustaining of human and worker rights, the maintenance of safety and health in

workplaces, the set of affordable prices and the promotion of consumer well-being.

Each of these elements should aim at reducing the social and environmental impact.

To conclude, in responsible fashion companies, the environmental and social

context are continuously communicating, and, the actions implemented by

companies must constantly try to respect its principles and needs. On one hand,

they must push towards the reduction of environmental impact, land use and reuse

resources and materials. On the other hand, they need to move in the direction of

economic and social development of the region in which they operate and in regard

of workers, of their rights and their well-being. It is, in short, a continuous exchange

between the company and the environmental and social context in which it is

inserted.

34

Chapter 2: Luxury and its complexity

2.1. The general concept of luxury

After having analysed what CSR is, how it is shaped and how it should apply to

each kind of organization, the study will focus on the luxury industry and how it is

linked to CSR and sustainable management. As it will become clear, the conception

of luxury turns to be particularly complicated to define exhaustively. Firstly, we

need to distinguish between the concept of luxury in general and the product/brand

of luxury. The generic idea of luxury refers to attributes such as quality, prestige,

elite status, and “art of living” linked to the perception of enjoyment and absolute

wellness. The ambiguity of the word luxury is strictly connected to the important

perception of rarity; luxury products need to be rare, exclusive or unique. The term

luxury derives from the Latin word luxus, meaning overabundance, excess, but also

pomp, magnificence, refinement. But luxury is also akin to the adjective luxum

«sprained, crooked», from which luxare, verb luxate and has the same root of lust,

in Latin luxuria, which originally indicated an abundance of vegetation or the

bizarre anomalous of some animal form. This immediately highlights a first element

of this concept appearing therefore ambiguous, presenting both positive and

negative features. In fact, on one hand it brings a positive meaning of oneiric

magnificence and desirability, something that generates the consumer's satisfaction

and guarantees a unique sensory and emotional experience. On the other hand, it

may present a negative meaning of excessive, unregulated and superfluous

sumptuousness, simple and pure ostentation, aimed at defining one's belonging to

the other layers of society. The negative meaning derives from the possibility of

approaching luxury even for individuals who are unable to fully understand their

meaning and value but use it as a mere boast tool.

This contraposition can be also found in the so called “paradox of luxury” between

exclusivity and accessibility. Overcoming the contrast between the negative and

positive value of the concept of luxury, we can see how the doctrine has offered

articulated and disparate definitions of the term "luxury", which are equally

commonly non-conciliatory and harmonic. Economists consider luxury goods those

35

whose demand increases more than proportionally with respect to income:

sociologists, corporations and consulting firms instead focus more on the elements

of the 43marketing mix developed specifically for this particular category of goods.

In 1997 44Jean -Noel Kapferer presented the semiotics of the word luxury and its

sociological references. “Luxury defines beauty; it is art applied to functional items.

Like light, luxury is enlightening. [...] They offer more than mere objects: they

provide reference of good taste. That is why luxury management should not only

depend on customer expectations: luxury brands are animated by their internal

programme, their global vision, the specific taste, which they promote as well as

the pursuit of their own standards. [...] Luxury items provide extra pleasure and

flatter all senses at once. [...] Luxury is the appanage of the ruling classes.”

According to Kapferer in fact, luxury comes from the Latin word lux, which means

light; light is helpful for both the individual and others, who are able to see him.

Light is one of the typical traits of fine products, brilliance, as in jewels also.

Luxury has in fact two meanings and refers to two images; Lux representing light,

thus the Angel determined by the word luxus, meaning abundance and Lux

representing Luxuria, a bad habit, thus the Evil referring to the word luxation,

meaning gap, excess. 45Bernard Dubois, 46Gilles Laurent and 47Sandor Czellar

instead define luxury goods as characterized by excellent quality, high price,

uniqueness, rarity, aesthetic relevance, a patina of tradition and, a superfluous

character.

Finally, one of the first definitions of luxury offered by a Comitè / 48McKinsey

research is the following one: luxury goods are considered products and services

43 Conceived by Jerome McCarthy, it is the set of marketing levers that the company defines and uses to satisfy the consumer and reach their market objectives. 44 He holds the Pernod-Ricard Chair on the Management of Prestige Brands and teaches Luxury Management in China, Korea and Japan. He is a world reputed expert on brands. He is known for his advanced work on brand identity, strategic brand management, brand portfolios, brand architectures and most recently on prestige and luxury management. 45 Professor of Marketing, Marketing Department, HEC School of Management, Jouy-en-Josas, France. 46 Corresponding author, Carrefour Professor of Marketing, Marketing Department, HEC School of Management, Jouy-en- Josas, France. 47 Research scholar, Department of Management Studies, University of Geneva, Switzerland. 48 A multinational strategic consulting firm founded in 1926.

36

positioned at the highest end of the market, incorporating knowledge of the applied

arts such as tailoring, craftsmanship and therefore implying a strong human

contribution. What connotes luxury goods is the high-quality craftsmanship

associated with an equally high price, which determines the exclusivity of the object

owned.

Nowadays this emptiness is abandoned and returns to its origins becoming a more

solid expression. So, it could be argued that "luxury is a focus on the art of living,

a way of life that derives from the pleasure of all the senses and appeals to dreams.

The quality of these products is based on a savoir-faire and a tradition; the ability

to make people dream comes from the creativity that allows the object to be rare”.

Luxury is characterized by three main elements; it is a transversal and global

market, and nowadays it is much more accessible by almost everyone. In fact,

luxury brands once enjoyed superior status among privileged elite consumers and

were traditionally targeting the wealthiest consumers. Moreover, unequivocal and

clear boundaries were established between luxury and non-luxury products. Today,

the concept of luxury has instead attained different meaning contents due to the

changing and expanding markets. Luxury brands have settled wider distribution

networks, expanded through online shops and reduced prices by selling in outlet

malls, thereby increasing their availability. Apart of expanding their distribution,

few brands decided to expand both horizontally and vertically with the aim to reach

a larger number of consumers. Clearly, diffused luxury brands tend to be lower-

priced symbolizing an attainable “taste of luxury” for the middle class. A crucial

element of luxury, the “rarity principle”, highlighted by 49Phau and 50Prendergast

in a paper, has been deemed by this trend that some people have called the

“democratization of luxury”, responsible for having turned the rare into something

ordinary. A striking example of the dilution of brand identification through product-

line extensions is Gucci. In the 1980s it wanted to capitalize on its prestigious brand

name by launching an aggressive strategy of revenue growth, thus it added a set of

lower-priced canvas goods to its product line. In addition, it also pushed goods

49 Curtin University of Technology Perth. 50 Hong Kong Baptist University, School of Business Kowloon Tong Hong Kong.

37

heavily into departments stores, duty-free channels and allowed its brand to appear

on a multitude of licensed items such as eyeglasses, watches and perfumes. This

strategy worked during the short term, in fact sales soared, and revenues increased,

but in the long-run the strategy resulted detrimental. Gucci’s indiscriminate

approach to expand its products and channels tarnished in sterling brand. Sales of

its high-end goods, which by the way implied the highest profit margins fell, caused

profits to decline. Differently from the 20th century, luxury brands do not present

themselves as a homogeneous category anymore: the market is fragmented.

More specific terms such as massive, affordable luxury, new luxury or super

premium have been conceived in order to picture and delineate the different levels

and richness of the luxury domain. These new terms further smudge the boundaries

of the concept of luxury and make its intrinsic value even more confusing.

Likewise, a debate on whether, due to the assimilation of a wider consumer society,

luxury is losing its lustre is undergoing.

2.1.2. The Product/Brand Concept of Luxury

The product/ brand luxury suggests a strategic connotation linked to the capability

of the company to sell highly differentiated products, marked by excellent quality,

exclusivity, uniqueness, rarity, and craftsmanship. Consumers then are able to

associate a symbolic value of status for these products that goes ahead the specific

functions of use and justifies their willingness to pay for such a premium price.

According to the product perspective, the luxury brand is typically associated with

the presence of positional goods such as items to which the value, for the one

possessing it is measured on the basis of the perception that the others have of the

product itself. Thus, it is clear that buyer’s satisfaction is due not only to the luxury

product’s utility and its qualitative characteristics but also to the social position and

the prestige such product gives to the owner. In order to preserve the positional

nature of the items and services over time, some specific requirements for luxury

companies, for instance the possession of multiple heterogenous resources and

diversified skills are needed.

38

This can be realized if companies involve creative people, artisanal masters,

scientists, researchers and managers in their value creating processes. In luxury

companies’ manufacturing process two key elements are closely connected; the

centrality of artistic creativity along with the manufacturing craftsmanship and the

importance of innovation. The luxury industry can be in fact considered an

innovation-driven industry, in which different but complementary dimensions of

the innovation are interrelated enabling to drive the competitiveness of the

individual companies and overall sector growth. To this respect, during an

interview on Vogue, 51Franca Sozzani said that luxury consists in research and the

testing of new ways to find new and original solutions. Indeed, she defined luxury

as experimentations. The types of innovations experienced are several; science-

driven innovation, guided by technology, but also innovation given by artistic

creativity, innovation linked to the capacity to continuously renovate artistic-

manufacturing skills and the artisanal knowledge strongly entrenched in the culture

of a territory, that frequently blusters ancient traditions. These considerations mark

the deep complexity of the world of luxury and the consequent difficulty in

circumscribing the sector within well-defined boundaries. It appears undeniable

that for many luxury items, the brand symbolizes the qualifying element; influential

is also growing importance of personalized items, often with very high prices,

relying on the intrinsic characteristics of the products. In this complex framework,

some Authors presented the idea of meta-luxury, heterogeneous world, which

avoids the traditional sector definitions. Meta- luxury is considered instead as a

business paradigm founded on knowledge, purpose and the pursuit of timelessness,

ultimately embodied in a unique achievement. In this perspective, meta-luxury

refers to a definite business model founded on three key elements: knowledge,

purpose and timelessness. Craftsmanship, focus, history and rarity are the critical

success factors offering an excellent product to the final customer.

51 Born in 1950, she was an Italian journalist and the editor-in-chief of Vogue Italia from 1988 until her death in 2016.

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2.2. The three macro-segments constituting the luxury industry

After having explored what luxury is and what it means, a more specific

segmentation of the luxury market can be done. In this respect, one of the

pioneering theoreticians of luxury, 52Danielle Allérès suggested the” luxury

pyramid”; a simple but effective analytic tool to understand the division of the

luxury environment into three macro-segments, to which the same number of

products and consumers correspond.

Figure 1: The Luxury Pyramid

Source: Luxury and the recent economic crisis, by Robert Olorenshaw

- inaccessible luxury: it is also called extra-luxury, it concerns scarce items, often

made to measure or in limited edition, of the highest quality and hand-crafted

production. Those assets are characterized by a high creative and stylistic content,

representing a higher value added for the company making the product exclusive

and unique. Products are distributed according to a very selective logic and with

extremely high prices indicating the fact that they are accessible only to few

selected customers, indeed, this segment corresponds to the high-end market. This

category is the so-called “uncompromising luxury”, a luxury that can take on

sumptuous, but also discreet features; highly precious goods whose manufacture

has a strong human and stylistic contribution and whose attributes give the beholder

a sense of elitism and uniqueness. The brands positioned in this band are the ones,

52 She is an economist and teaches at the University of Paris III Sorbonne Nouvelle. She is at the origin of the DESS Management of the professions of luxury, fashion and the Founding Art of the Luxury Fashion Art Research Center.

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which are mostly distinguished by tradition and uniqueness. The concept of

uniqueness takes shape also in the difficulty of finding the good; it follows a limited

distribution and a restricted availability to selected sales points, given that luxury

goods lose their uniqueness as they increase their availability. There will be always

a future for inaccessible luxury since that small niche of luxury will be willing to

continue being as such. Nowadays, we are going back to the concept of luxury

products rather than luxury brands; the traditional figure of the artisan is re-

emerging, as well as the tailor, who dresses to measure, knows the client’s needs

and physicality very well and knows immediately how to advise him. Powerful

examples, which perfectly suit this category of goods are 53Cartier’s jewels, 54Louis

Vuitton’s trunks as well as 55Dior’s, 56Chanel’s Haute Couture, or the 57Hermès

Birkin iconic bag: its basic price is around € 5,000 but can reach even € 120,000.

- intermediate luxury: this includes products as far as style and brand are concerned,

they have characteristics common to the goods belonging to the superior category

and in a certain sense, imitate inaccessible items. These products, although not

custom made, have a remarkable quality level, may be adapted to customer’s needs

and are distributed selectively in the medium-high price range despite its production

takes place on a wider scale. This band includes for example a 58Prada bag costing

from € 600 to € 15,000, prêt-à-porter, leather accessories and perfumes, goods

destined to customers who are particularly sensitive to the brand, who are unable

or unwilling to spend too much money. Nonetheless, they are still willing to make

53 Founded in 1847 Cartier is a well-known manufacturer of jewellery and watches and it is a branch of the Compagnie Financière Richemont SA. 54 Founded in 1854 Louis Vuitton is a French company specialized in fashion accessories, leather goods and pocket watches. It belongs to the French luxury goods multinational Moët Hennessy Louis Vuitton SA. 55 It is a European company, formerly French as Christian Dior S.A., specialized in high fashion. It was founded by Christian Dior and is currently owned by Bernard Arnault, owner of the LVMH luxury group. 56 Chanel S.A. is a Parisian fashion house founded in 1919 by Coco Chanel. Specializing in luxury goods, the Chanel brand has become one of the most recognizable names in the field of fashion. 57Founded in 1837 Hermès is a French company of high fashion and prêt-à-porter, accessories, leather goods, bags, furniture, home accessories, jewellery, perfumes and luxury luggage. 58Founded in 1913 Prada S.p.A. is an Italian holding company operating in the fashion industry.

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an economic sacrifice, albeit in part more content, to have a trendy product of a

brand, which originally belongs to the inaccessible luxury category.

- accessible luxury: it is considered “non-standard” because it is qualitatively

sought after, trendy, with technical characteristics suited to functional

performances, capable of creating a particular emotional involvement, which is

obtainable at accessible prices. It includes branded products of serial production,

whose content is still constant, but it is a more contained price range while having

a higher price compared other products of the same product category. Such products

correspond to the “masstige” segment, they have a clear vocation for luxury but at

the same time they are more accessible to the average consumer seeking a luxury

product at a non-prohibitive price. If the production of luxury objects was once

exclusively artisanal and thus restricted, nowadays, thanks to the standardization of

the production processes and to the full exploitation of the economies of scale,

companies are able to cope with very substantial orders and reduce their selling

price. This production and range of products expansion has given rise to the so-

called masstige products, positioned between the highest level of the mass market

and the lowest level of the luxury product. 59Michael Kors is a prime example; the

price of his 60Selma bag is around € 300.

2.2.1. The segmentation of luxury demand

Who is the ideal consumer? Where is he from? What empathic relationship is

established with him? Many questions arise for the construction of an identikit of

the global shopper, which represents an important need for brands as well as a tool

for companies in order to read the markets and their strategies. In this respect, the

contemporary evolving trend that characterizes luxury suggests the division of the

industry into sub-segments in order to capture better consumer’s characteristics at

a global level, as well as the importance that the cultural and geographic elements

have on the choice of purchase. A research of 2015 “True Luxury Global Consumer

59 He is a stylist and American entrepreneur who operates in high fashion and prêt-à-porter. 60 Michael Kors iconic bag.

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Insight” conducted by the 61Altagamma Foundation in collaboration with 62Boston

Consulting Group proposes a segmentation of luxury demand in 12 segments: 8

global segments, 2 specifics by country and 2 by gender, which allow for the fine

and detailed description of the plurality of luxury consumers. Each segment

coincides with a precise luxury consumer profile both under a a socio-economic

and demographic perspective, but mainly under an attitude and behavioural

perspective. Some consumers seek for the uniqueness of the product or the social

status, others are characterized by their attitude toward fashion, their degree of

emotional connection to the brand, their loyalty to the brand or the degree of

independence in the choice.

-The Absolute Luxurer: he is a connoisseur, a refined and elegant person who was

born and grew up in luxury, nothing is too much for him, in fact, compromising

with brands and products is not an option. More precisely, he is the European elite

and the happy few from emerging markets. He pays particular attention to

everything that is unique and customized and buys both personal and experiential

luxury, these types of customers do not like to experiment and purchase luxury to

reward themselves. The Absolute Luxurer represents approximately 20% the

leather goods market and also represents the first contributor to future growth.

Quality, craftsmanship and exclusivity are essential and non-negotiable. Moreover,

these consumers also identify excessively discounted prices and the too frequent

presence of entry prices that are too low as a deterrent to the purchase of a particular

brand. Two consumers out of three make previous online researches before

purchasing bags into the boutiques, mainly because they search for information

about the product, where to find it and the possibility of interacting with the brand.

70-80% of these consumers prefer brands born in the leather goods industry. This

61Founded in 1992, it brings together companies from the Italian high cultural and creative industry, recognized as authentic ambassadors of Italian style in the world. Its mission is to contribute to the growth and competitiveness of Italian cultural and creative industries. 62Founded in 1963 by Bruce Henderson, Boston Consulting Group is a US multinational strategic consulting firm with 90 offices in 50 countries. It is considered one of the "Big Three" in the world of management consulting.

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segment counts about 2 million consumers who buy €70 billions of luxury a year,

with an average cost of €30.000 per person.

-The Megacitiers: these consumers all share the same tastes, playlist and holiday

destinations whether they live in London, Paris, NYC, Moscow or Shanghai.

Luxury is perceived by them on the basis of quality and customization, moreover,

megacitiers are interested in the latest trends but not extremely and they target to

purchase few brands at a time. Local trends have the possibility to immediately

become global thanks to them, since they are part of the elite and have international

imprinting. The Megacitier represents about 15% of the clothing market and is the

first contributor to future growth. The "casualization" of clothing is, for this

consumer segment, very relevant. On average, a consumer spends 2x in informal

clothing compared to the formal, this gap reaches 3x if we consider male consumers

in emerging markets only. Ornate aesthetics, rich in colours, fabrics and details are

imperatives for these consumers representing 28% vs. 16% of the other segments.

In particular, the search for extravagances and colours is particularly felt by women

accounting for the 31%. When buying clothes, the Megacitiers prefer Shopping

Malls and Department Stores mainly because of the presence of the right mix of

brands and a relaxed environment. This segment includes about 2 and a half million

consumers with a strong presence in Brazil and China, New York and European

capitals. They are 30-35 years old customers who spend approximately €17.000 a

year and generate €41 billions of consumption.

-The Social Wearer: luxury represents the green carpet for a better world for the

social wearer. When it comes to defend and demonstrate for animal rights he does

it strictly in a “Green 63Valentino” dress. Thus, it is straightforward that quality,

sustainability and “Made In” are fundamental conditions for the purchase. This

segment counts around 2 million individuals between 35 and 40 years significantly

present in France, Germany and Brazil; they spend approximately €10.000 a year

in luxury generating a market of €17 billions. He constantly seeks for the emotional

63 He is an Italian designer, creator of the eponymous brand.

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connection with the brand, which leads him, once conquered, to be very loyal

customers committed to only few brands. Does this attitude and way of buying

luxury goods represent maybe the vanguard of something that will become ever

wider?

-The Experiencer: he believes that besides "personal luxury" there is "shared

luxury", moments of happiness on a journey or during a starry dinner that are worth

much more than just another dress in the wardrobe. The experiencer is a

sophisticated and discreet consumer who doesn’t like to appear, he spends mainly

for holidays, hotels and luxury food. This customer born of the ashes of the

European, American and Japanese roaring luxury. The segment includes about 3

million consumers aged between 45 and 50 years with an average expenditure of

€13.000 thousand a year generating a value of €35 billions.

-The Little Prince: this is the Z Generation born with an easy life thanks to his

parents’ fortunes, thus, luxury comes naturally to him. Aged between the 18-25 age

group, he used to play with branded toys; he is an impulsive shopper, connected

and hungry for novelty and colours. Luxury is about being cool and innovative.

Brand and aesthetic of the brand, which can be sometimes extreme are considered

more important than the intrinsic quality. He buys clothes, but also accessories,

especially shoes and bags. The Little Prince also represents about 10% of the

fragrance and cosmetic market being the segment with the fastest growth in the

future. 30% of them buy online and, even in this case, the brand site is the preferred

choice. Their propensity to buy online goes up to 70% (2x current purchases),

moreover, they are very influenced by the word of mouth (56%), both physical and

digital. This buyer segment includes about one and a half million young luxury

consumers who already spend €10.000 each for a total market of €17 billions.

-The Fashionista: she is always aware of what is going on, going out on the street

is like a parade to her, she loves design and her entry ticket to the magical world of

luxury is shopping. Clothes, bags, shoes, perfumes, cosmetics, she buys everything

with no exceptions. The fashionista knows everything; from the most famous

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brands to the latest style discovery. This segment includes about 3 million

consumers who are mostly women pertaining to the 35-40 age group. They spend

an average of €8.000 a year for a total market of €22 billions.

-The Status Seekers: they live on a stage where the stage costume must obviously

show its logo prominently and a watch or a flashy accessory cannot surely miss;

thus, they buy luxury to show off wealth and success. The status seeker does not

like to experiment, tending in fact to follow trends and brands, which are already

established, specifically targeting well known products that are easily recognizable.

Approval means everything. This segment counts about 2 million consumers aged

35 to 40 with a strong presence in Asia but also America who spend €7.000 a year

generating a market of €14 billions.

-The Classpirational: the most important thing to him is to do not disfigure in front

of his boss. To him, accessible luxury is the mean through which he feels accepted

in his community especially the working one. This category includes not

particularly sophisticated luxury consumers, far from the idea of experimenting,

who are in search of classic apparel and accessories: they have a principled

consideration of money, valuating quality and trusted brands as the main purchase

drivers. In fact, they use online shopping to compare prices and duty frees as an

alternative to multi-brand shops. This set of consumers counts around 3 million

consumers, both women and men between aged 30 to 35 with a strong presence in

Korea, Germany, France and Russia. Their average expenditure is about €3.000 per

year generating a market of €8 billions.

- The Timeless Propers: Coco Chanel represents these consumer’s myth whose

motto is “time passes, style remains”. These ladies are classic, refined and elegant,

dressed up with a brush on every occasion. They usually buy shoes and bags by

constantly paying attention to the “Made in Italy” and the quality of materials;

taking on risks is not for them, they adore the classic and timeless style and are

extremely loyal to a few brands and shops located in exclusive and elegant areas.

This segment, together with the one described below account for around 15% of the

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jewellery and watch market and are the first contributors to future growth. Timeless

Propers are consumers who 90% of the time buy watches for themselves contrarily

to the other segments, which do it 70% of the time. Additionally, this percentage

tends to rise up to 100% for the most senior generations. Purchases are made 90%

of the time in physical stores; in the United States the favourite purchase channels

are Department Store sand Mono-Brands, in Europe the traditional multi-brand

channel wins instead. This category counts around 2 and a half million consumers,

mostly women who spend €9.000 a year generating a total value of €21 billions.

-The Omni Gifters: these are men of the past for whom luxury means making their

beloved happy and “giving” is their natural attitude towards the world of luxury.

They are mostly men aged 45 to 55, much more present in mature countries

compared to the emerging ones. When the Omni Gifter buys jewellery as gifts for

their beloved (94% of its purchases vs. 23% of the other segments), he seeks the

quality and craftsmanship of the products. Eight consumers out of ten prefer to buy

jewellery from pure jewellery brands that have not extended their portfolio to other

product categories. This segment includes approximately 2 million consumers with

an average expenditure of €10.000 a year constituting a market of €21 billions. They

buy mainly jewellery, vacations and luxury food; when making gifts, product

quality and in-store service are essentials.

-The Rich Upstarter: he’s the new rich in emerging countries who has worked hard

to get where he is and has just realized he can spend his money in luxury

consumption. They are still immature consumers, nonetheless they have a very high

potential; perfumes, cosmetics and accessories represent their first steps into the

luxury world. Moreover, social media, celebrities and TV advertisements strongly

influence and drive their purchase decisions. Consumers present only in emerging

countries are just over one million, especially in Russia, China and South Korea.

They make up a market of €5 billions each spending an average of €4.000.

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-The Luxe-Immunes: they have the capability and possibility of buying everything,

but they seem as being immune or disillusioned by the luxury world’s temptations.

This segment is concerned with a concrete consumer, strongly focused on himself,

tending to spend very little in luxury goods compared to his income. Usually, they

make their purchase decisions based on suggestions received from family, friends

or in the store. Luxe-immunes include about one and a half million consumers aged

between 50 and 55 who are present only in mature markets; they spend

approximately €4.000 a year creating a market worth €6 billions.

After having described the different categories of luxury consumers, some key

conclusion can be taken; Absolute Luxurers, Megacitiers and Experiencers are

those who consume mostly (more than €15.000 per year) and they represent more

than the 50% of total luxury spending. In a few years, those three groups will be the

leading actors representing the main contributors to growth, while Megacitiers and

Little Princes instead will represent the consumers with the fastest growth.

Concerning the United States, the principal contributors of growth will be identified

with the Absolute Luxurer and the Experiencer, followed by the Timeless Proper

and the Fashionista. In respect of China, what emerges is that the most relevant

segments are the Megacitier, the Fashionista followed by the Absolute and the Little

Prince. Each of these segments has different needs and preferences in terms of

information sources, purchase channels, categories and typologies of purchased

products. Beyond the number of identifiable segments, we can further divide the

global demand in two macro categories. They refer to the high-end segment or

alternatively inaccessible luxury and the mass-market segment or alternatively

“democratic” luxury. Although the sub-segmentation plays an important role in

defining the different marketing policies undertaken by the company relative to the

various components of the demand under the strategic profile and business models,

decisions for competitive positioning are concentrated on two key factors. On the

one hand, decisions depend on the demand expressed by the accessible luxury

segment, with the prospect of realizing huge profit margins in a relatively short

period and to affirm the brand’s global strength. Contrarily, sustained growth at a

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global level, both dimensional and in terms of billing, is identified in the extreme

or inaccessible luxury segment. There, demand is based on intrinsic values such as

quality, craftsmanship, rarity, exclusivity, timeless classicism and promotion of the

“Made In” as a strategic resource for the most wanted external aspects in the mass

market segment. Examples of such external factors are brand recognition, aesthetic

components, design aesthetic or coolness.

Mature markets, in which demand is represented by Europeans and Americans elite,

aren’t the only place where the strategic nature of these assets is confirmed. It is in

fact increasingly confirmed also in emerging markets, where the importance

attached to intrinsic values of luxury is the main driver in the purchase choices and

brand loyalty. The two strategic options for market coverage (mass-market vs. high-

end segment) are not inevitably alternatives to one another. Recently, the flowering

of large clustered companies such as the 64LVMH Group and 65Group Richemont

having brand portfolios, which include exclusive lines targeting the elite segment

and mass-luxury products simultaneously show companies’ desire to capture both

demand segment’s attractiveness. Beyond the strategies adopted, the promotion of

the intrinsic elements of the product/service and its distinctive characteristics rather

remain the main approach through which companies are capable of preserving the

long-term value of the brand identity. This analysis leads to notice the growing

importance attributed to topics such as responsibility and sustainability; an

importance appearing closely related to the evolution of the concept of luxury itself

as well as to its intrinsic values. These are good taste, the savoir-faire of choosing

fine materials, authenticity, taste, quality and value over time, building the bridge

that links the world of luxury with that of sustainability. Luxury is indirectly linked

to sustainability since the value of craftsmanship, especially if territorial, is strongly

linked to that of social responsibility; contrarily from items for mass consumption,

64Founded in 1987, it is French multinational luxury goods conglomerate headquartered in Paris. The company born under the merger of fashion house Louis Vuitton with Moët Hennessy, a company formed after the 1971 merger between the champagne producer Moët & Chandon and Hennessy, the cognac manufacturer. 65The group owns several of the world's leading companies in the field of luxury goods, with particular strengths in jewellery, watches and writing instruments. The maisons encompass several brands such as Chloé, Cartier, Van Cleef & Arpels and Jaeger-LeCoultre.

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the luxury product assumes extremely different characteristics through the savoir-

faire, which is often passed down for centuries. The same evolution of

characteristics of global demand explains the growing consideration of toward

responsible and sustainable luxury. From the unreachable dream connected to the

possession of a particular item, the idea of luxury is likely to free itself from the

economic value of a product and from the singular’s spending facility and is instead

connected to a more intrinsic ethical/social idea of value, to a lifestyle linked to

emotional and experiential values. In this framework, the concepts of responsible

and sustainable luxury come to life, and, from a mere marketing choice, they

increasingly assume a strategic value, becoming an important tool of

differentiation.

2.2.2. The luxury market

The 17th edition of the 66Bain Luxury Study, published by Bain & Company for

Altagamma Foundation, analysed recent developments in the global luxury goods

industry as well as its future outlook. The luxury industry analysed by Bain

encompasses both luxury goods and experiences and takes into consideration nine

segments, guided by luxury cars, luxury hospitality and personal luxury goods,

which collectively sum up to more than 80% of the total market. Factoring all

segments, overall, the luxury market grew by 5% in 2018, to an estimated €1.2

trillion globally, with good performance across most segments. The business of

luxury cars continued to prevail in the market, showing a healthy growth of 5% at

constant exchange rates to €495 billion, but with a slight decline in the growth rate

compared to 2017. Luxury experiences were still very attractive for consumers, as

depicted by the increase in luxury hospitality’s sales, a 5% increase from last year,

gourmet food and fine dining increased instead by 6% and luxury cruises by 7%.

66 A report authored by Claudia D’Arpizio, global leader of the Luxury and Fashion vertical at Bain & Company, Federica Levato, leading member of the Luxury and Fashion vertical, Filippo Prete, a Bain manager, Elisa Del Fabbro, a Bain consultant and Joëlle de Montgolfier, the practice area senior director of Bain for Retail, Luxury and Consumer Products in Europe, the Middle East and Africa.

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Fine wines and spirits increased by 4% on average, sales of high-end food instead

grew by 6% from last year. Yacht sales had instead a flat performance even if

Chinese buyers have shown an increasing interest in them. The private jet market

continues to deteriorate due to the 67cannibalization from the second-hand market.

The figure below summarizes all the elements analysed.

Figure 2: The Global Luxury Market

Source: Bain & Company

But what about the market for personal luxury goods, the “core of the core” as well

as the focus of our analysis? The figures below show how in 2018 it reached a

record of €260 billion with 6% growth, 2% at current exchange rates. Overall, the

personal luxury goods market grew across most regions and was driven mostly by

more robust local consumption, increasing by 4% globally at current exchange

rates, while tourists’ purchases remained on average flat. Apparel, beauty and

handbags persisted in constituting the bulk of global luxury purchases, accounting

to €60 billion, €56 billion and €51 billion, respectively. Jewellery and shoes

represented the highest luxury growth categories obtaining 7% each, followed by

67 The reduction of the sales of a company's own products as a consequence of its introduction of another similar product.

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beauty and handbags. Apparel suffered mainly because of lower sales in the

menswear segment while watches remained flat. Europe continued to be the top

region for sales, followed by the Americas, Asia, including mainland China, Japan

and the rest of the world.

Figure 3: Share of Global Luxury goods market by Region

Source: Bain & Company

Figure 4: Global personal luxury goods market, by product category

Source: Bain & Company

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Chinese consumers’ share of global luxury spending remained instead unsurpassed

raising continuously representing now the 33% of the total, up from 32% in 2017.

Figure 5: Share of global personal luxury goods market value, by consumer nationality

Source: Bain & Company

In Mainland China instead, luxury sales by 20% to €23 billion with a raising

demand. Between 2015 and 2018, Chinese consumers’ local purchases gave twice

as much growth in absolute value as their spending abroad. In 2018, Europe instead

slowed up since strong currencies limited tourists’ purchasing power. Anyway,

despite mixed performance across countries, local consumption was positive

overall helping to push retail sales up by 3% €84 billion. Given the positive US

economy, which encouraged disposable income and overall luxury spending by

local consumers, Americas luxury sales reached €80 billion indicating a growth rate

of 5% (–1% at current exchange rates). However, the strong dollar restrained

spending by tourists from Asia and Latin America; Canada and Mexico instead

were strong markets, while political uncertainties hindered the Brazilian

performance. Concerning Japan, luxury sales decreased slightly with a rise of 6%

to €22 billion; across the rest of the Asia sales grew by 9% to €39 billion. Finally,

in other areas of the world, growth has been flat, with sales of 12 billion euros,

mainly due to stagnation in the Middle East. Furthermore, the region’s unstable

geopolitical situation has lowered tourist volume.

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2.3. The luxury marketing mix

Luxury brand’s marketing is one of the most complicated disciplines. The ratio of 68functional utility to price is small for luxury brands whereas the ratio of 69intangible utility to price is extremely high. Marketing for luxury goods is in fact

highly particular and individual since customers are affected by glamour and style

panting to stand out in a crowd. By recognizing these two assumptions, we will do

an analysis of the marketing mix, considering the exigencies of luxury and

acknowledging that the degree of significance of these elements may vary from

brand to brand and market to market.

1. Product

The product represents the physical artefact a company produces and sells in order

to satisfy customer’s needs. It has to be unique or at least seem unique. Although

technology plays an important role in boosting the finishing touches in order to

refine the products or make them more accessible, the major benefit concerns the

prestigious raw materials utilized as well as the lofty quality level of production,

often realized by hand. Moreover, during the 19th century the sewing machine was

invented; this instrument furnished the technology necessary in order to massify

and scatter quality clothing, therefore enabling, for the first time ever, to make

luxury something affordable on a large scale. Elegancy and actuality due to the

brand’s history, remarkable performance and durability make the expected luxury

product extremely desirable. The increased luxury product instead is obtainable

only by adding tangible complements such as hyper customized services, which

involve for instance the repair and return of the product within 24 hours. Anyhow,

this feature applies typically to the inaccessible luxury branch. Concerning

intermediate luxury instead, these extras are still possible, but as options or for a

68 It indicates the usefulness of a property to the needs of the occupant. 69 It indicates a good that does not have a physical nature, as opposed to a physical good

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lower personalization; it follows that personalized services in the intermediate

luxury category develop into something customary and risk of turning into

standardization and/or incompleteness. Furthermore, luxury clothes may be

available only in sizes, which symbolize the Maisons, cutting out the others, thus,

product variety may also be restricted. Additionally, thinking for example to the

wood boxes for luxury watches, even the product’s packaging has a relevant role;

blind tests have been made and results confirmed that the more the packaging is

made with prestigious materials, the more the same product is highly admired and

appreciated. It is intuitable that luxury goes much further than the product itself, as

we have previously analysed for the service.

2. Price

The price concerns the value that is given to the product as a result of complicated

sets of calculations in which the Finance, Strategy, Marketing and Accounting

Departments are involved. In the case of luxury items, costs are high due to the

choice of using prestigious and refined raw materials, along with manufacturing,

processes used, and selected distribution and advertisements located in the most

expensive corners of magazines. The geographical areas in which the Boutiques are

located are also a source of higher costs, think for example to the Brunello Cucinelli

S.p.A., the brand has strategically selected the leading and most fashionable cities,

streets and resorts worldwide where to open its boutiques. Taking into consideration

Italy, the boutiques are present in Rome in Via del Babuino, in Milan in Via

Montenapoleone, in Porto Cervo, Capri, Portofino, Forte dei Marmi and many other

locations. Concerning the United States, we can again observe how the stores have

been placed in the most important cities and most prestigious streets such as in New

York in Madison Avenue, in Palm Beach, San Francisco, Las Vegas and Chicago.

Thus, as figured below, it is possible to determine the final price as the sum of the

amount of money customers are willing to spend and the value added, which can

be in turn shaped by reputation, relationship, experiential or symbolic values.

Firstly, Reputation Value indicates the brand cultures, which shape the perceived

product quality. Secondly, Relationship Value refers to brand cultures shaping the

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relationship perceptions. Thirdly, Experiential Value hints the brand cultures,

which frame consumer experience. Finally, Symbolic Value indicates the brand

cultures expressing values and identities.

Figure 6: Luxury goods’ price

Source: Keeping Luxury Inaccessible, by David Ward and Claudia Chiari

Luxury companies need to have control over the management of prices, since

luxury buyers compare prices of the same items in different countries, which is the

reason for which prices vary across markets depending on the general cost of living.

In fact, it plenty of eastern tourists burgle Boutiques in Italy because in China for

example, list prices of brands are burdened by taxes on imports and consumption.

In 2012, Thomas Mesmin and Jürgen Kolb, 70Kepler Cheuvreux analysts based

respectively in France and Germany, developed an analysis concentrated on ten

iconic products of different brands asking to the directly operated stores in Europe,

Shanghai and Hong Kong. The final figure is this: “That, which costs a hundred in

Europe rises to 120 in Hong Kong and flies to 149 in Shanghai, with a differential

of 49 percent.” The primary reasons for this price increase, as mentioned before,

are the taxes and in particular the 71Value Added Tax (VAT), a type of tax paid by

the person who buys goods and services. In Europe, the average VAT is 17%, in

Shanghai instead, it is necessary to add an 11% due to imported products plus a

20% consumption tax. For instance, the iconic “2.55” Chanel bag costs €3.100 in

Europe, € 3.928 in Hong Kong and €4.447 in Shanghai. The table below represents

70 It born as the result of the merger between Kepler Capital Markets and Crédit Agricole Cheuvreux, in April 2013. It is a financial company specializing in research, execution, advisory and asset management services. 71It is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale.

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10 iconic pieces and their relative prices determined in Euro currency, in Europe,

Hong Kong and Shanghai stores.

Figure 7: Ten iconic pieces and their relative prices

Europe Hong Kong Shanghai

Burberry Trench € 1.226 € 1.436 € 2.104

Louis Vuitton Bag € 570 € 684 € 829

Jaeger Lecoultre

Watch

€ 7.500 € 8.011 € 9.195

Gucci Bag € 1.250 € 1.640 € 2.018

Ferragamo Shoes € 398 € 508 € 673

Chanel Bag € 3.100 € 3.928 € 4.447

Prada Bag € 1.850 € 2.340 € 2.903

Omega Watch € 5.300 € 6.839 € 7.356

Rolex Watch € 6.285 € 6.067 (-3.5%) € 7.921

Tod’s Shoes € 300 € 342 € 457

Source: Own Elaboration

3. Promotion

Promotion is strictly related to all decisions and activities through which a company

decides to communicate the features and characteristics of a product to the user.

The main idea is to make people aware as well as attract and induce them to buy

the product in preference over others, by making the product an object of desire, a

personality enhancer, able to seduce and fascinate. Thus, this must convey the brand

and its position. Specifically, luxury brands tend to use the press as a mean of

communication, trying to avoid the ordinary elements of advertisement such as pay-

offs, body copies and headlines. Similarly, press advertising is quite stagnant and

mainly focused on the product and the brand. Newspapers instead attain a

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considerable number of readers, anyway, graphic quality is poor and customer

selection is lacking being very limited. In the case of specialized magazines,

interested parties are reached directly and thus, graphic quality is much richer and

consequently the price charged for the space and audience is greater. Billboards and

public transport advertising are adopted by luxury companies, too, albeit seldom,

carrying a singular advantage of being conspicuous but conceivably invasive.

Promotion through television, radio or cinema is generally averted because it risks

of being too selective, universal or exclusive. However, sometimes, in the case in

which a TV program is highly explicit, for instance a TV series dealing with high-

end luxury fashion TV channels exceptions can be made. Events and public

relations remain the essential promoting tool in the fashion system representing its

backbone. In fact, the prosperity of a new collection, catwalk shows, or any events

related to the brand, depend on the public relations and press offices. Finally, the

individual responsible for the communication and promotion strategies of a Fashion

Brand is vested by the Fashion Promoter. Its role consists in conveying the brand’s

vision, style and values, promoting fashion and luxury products through the

organization of events, exhibitions, fashion shows, presentations and advertising

campaigns.

4. Place

This looks at the distribution of the products, the way through which they serve and

satisfy customer needs, here, rarity represents the primary need. Distribution can

take two forms. The so-called “own and direct distribution” used by the brand are

the 72Retail Distribution Channel, such as the online boutique, or the 73Direct

Distribution Channel, through 74Directly Operated Stores (DOS). Direct

distribution allows to control the entire distribution system, granting assistance and

technical support thanks to agents, 75franchisees or direct property of the stores. The

72 A chain of businesses or intermediaries through which a good or service passes until it reaches the final buyer or the end consumer. 73The producer sells its product directly to the end consumer. 74 Points of sale in direct management. 75A business that has bought the right to sell the products and services of another company.

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main advantages of this option consist in having the possibility to have a direct

contact with clients and customers, expanded information from the market and the

chance to apply directly strategic marketing policies. The partners and indirect

distribution instead are a completely different circumstance, which implies that the

product distribution is conferred to an external organization. These include 76Retailers, 77Wholesalers, 78Luxury Department and Multi Brand Stores around the

world. The Multi Brand Channel thus consists of independent multi-brand stores

where brand allure is supported by dedicated spaces within Department Stores.

Indirect distribution may be advantageous in the case in which the volume of selling

is not sufficient to use direct distribution and the brand requires the avoidance of

costs related to distribution and stocking or simply needs a distribution network.

Contrary to direct distribution, in this case there is no direct approach with

customers and clients and marketing strategies cannot be directly applied by the

firm, hence leading to a definitely lower investment risk. It is possible to summarize

the core aspects of each of the four elements of the marketing mix of luxury

companies in the figure below.

Figure 8: The 4Ps of luxury markets

Source: Keeping Luxury Inaccessible, by David Ward and Claudia Chiari

The luxury marketing mix will be now extended to the 7Ps model, being more

adequate for the analysis of the luxury industry, which is a knowledge-extensive

76 A person, shop, or business that sells goods to the public. 77 Someone who buys and sells goods in large amounts to shops and businesses. 78 A retail establishment offering a wide range of consumer goods in different product categories known as "departments".

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environment where services are part of the products. In 1981, 79Bernard H. Booms

and 80Mary J. Bitner formulated the 7Ps marketing mix model by further developing

the traditional marketing mix, adding three elements; people, process and physical

evidence.

Figure 9: The 7 P’s Marketing Mix Model

Source: Talisman, article by Bridgette Ellis

5. People

The factor “people” indicates all the people belonging to the same target or who

can pertain to a strictly correlated target. It is important to focus the target in the

right way, and, through a careful analysis, to understand if the highlighted segment

is large enough to form a profitable market. Thus, they represent everybody who is

directly or indirectly involved in the consumption of the product or service. In

addition to this, the 5th P of the marketing mix is useful for identifying the

professionals to be hired in order to manage 360-degree communication with

potential and actual customers, such as consumer care officers, copywriters,

programmers and experts in 81Search Engine Optimization (SEO), 82Search Engine

79 He was a lifelong academic and business consultant, he conducted research and co-authored seminal publications in the field of services management. 80 A well-known professor and active researcher in the field of services and services marketing. 81The set of activities aimed at improving the positioning (ranking) of a site or a web page for certain keywords in the results provided by a search engine. 82It indicates the set of strategic promotion activities, carried out on search engines, to generate valuable traffic to the website.

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Marketing (SEM) and 83Social Media Marketing. With a targeted marketing action

accompanied by a 84lead nurturing, you can manage to understand many features of

the target customers to improve the product, the price and the marketing strategy in

general. Any employee of the company who is in contact with customers and

potential customers needs specific training to motivate them and let them

experience the real benefits of the product so that they can be transmitted

unconditionally to the customer. A company willing to invest in this sense certainly

has a weapon more than the competitors to put in place to sell more products. Thus,

experienced workers, employees, management and consumers frequently add value

to the final product or service offered.

6.Process

A crucial part of marketing strategies includes customer and product management

processes. Nowadays, specifically the big luxury brands such as Louis Vuitton,

Gucci, Prada, Fendi etc. have begun to pay noticeable attention to the exploitation

of the hidden knowledge of their clients by processing computerized records of

transactions and leveraging 85Customer Relationship Management (CRM) as well

as 86Business Intelligence (BI). The core concept of business intelligence consists

in making use of available data in order to have a better understanding of customer

needs and habits independently of which store they shop in. As data are adapted

into information and hopefully into knowledge, the company can farther

personalize and be more efficient, for instance by interacting and inviting potential

customers to new product launches directly.

83That branch of marketing that deals with generating visibility on social media, virtual communities and aggregators 2.0. 84It consists in cultivating and nurturing one's contacts in order to lead to being ready for the purchase of a product or service. 85It is a strategy for managing all the relationships of a company and the interactions that take place with potential and existing customers. A CRM system helps companies stay in touch with customers, simplify processes and improve profitability. 86It refers to the procedural and technical infrastructure that collects, stores, and analyses the data produced by a company’s activities. BI collects all the data generated by a business and presents, performance measures, and trends that inform management decisions.

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7.Physical Evidence

This represents the capability of a brand to obtain customer satisfaction and to build

the environment in which products and services are delivered. How is the service

provided by the end user perceived? The evaluation of what the customer think

about a purchased product is essential in order to create a positive image in their

minds. Often, especially on the web, people look for evidence, testimonials and

reviews before buying a product by relying on references from third parties who

have already interacted with the company that markets it. When the potential

customers belonging to the target, look for case studies and documented

testimonials on the products addressed to them, this leads them to get a physical

image of the company that sells the product, which can increase the perceived trust

or not. Moreover, it is fundamental that the physical environment is consistent with

the other aspects of the marketing mix a well as with customer’s expectations. The

original authors described it as the environment in which the service is delivered

and where the interaction between the client and the firm occurs, and any tangible

components that facilitate performance or communication of the service. One of the

first individuals who considered the importance of the store environment analysing

the atmosphere of the point of sale (POS), was Philip Keller. He perceived POS

“more influential than the product itself in the purchase decision. In some cases, the

atmosphere is the primary product”. Keller also classified three different types of

effects steaming POS: it can be a means of attracting attention, to build an identity

and to stimulate emotions in the customer. The case of Brunello Cucinelli perfectly

describes the attention and accuracy that should be invested in taking care of the

environment and atmosphere of the Boutiques; each, wherever it is, lets customers

“breathe Italianisms” and transmits them several values and sensations such as

peacefulness, happiness and familiar atmosphere. To conclude, some believe that

luxury marketers should also consider or add a new “P” to gauge success:

performance. It is a key word for today’s experiential market because luxury can

be considered to be a real verb performing for customers. Performance becomes the

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apex and translation of physical evidence into shapes and facts. Almost an official

seal of control, distinction and distance and therefore a measure of inaccessibility.

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Chapter 3: Sustainability in the Fashion Luxury: The Stella

McCartney case

3.1. The importance of sustainability

In the first chapter, we discussed the concept of Corporate Social Responsibility

along with the Social Responsibilities of firms. The latter is closely linked to

sustainability, a more and more essential element required nowadays in order to

operate in the new competitive scenario. The concept of sustainability has affirmed

itself and achieved broad acceptance during the years, to the point of dominating

that of Social Responsibility. The primary meaning of sustainability is strictly

related to the ecological dimension; acting in a sustainable manner from an

ecological point of view means taking decisions, which enable to reduce the

environmental impact of the activities performed during the production such as the

containment of consumption and productive execution. In this way, the procedures

used for the production but also the raw materials used do not represent a threat to

the environment. At the same time, sustainability reflects the respect for the health

and conditions of the workers as well as consumers, human rights, and the effort in

creating renewed relationships with all stakeholders and the local community in

which the firm operates. Finally, a strategic view of sustainability refers to the

pursuit of wellness, improved quality of life, and conscientious behaviour towards

the community. Under a competitive scenario perspective, the component

representing wellness becomes a way through which the wealth that a production

system is able to produce is measured. Hence, the concern of sustainability takes

on a strategic content, which is not exhausted in ethical responsibility and respect

for regulations. Accepting this ample and inescapable meaning, sustainability

favours the embracing of the individual segments of the luxury market previously

discussed by the BCG segmentation in Chapter 2, since it becomes a transversal

concept assuming the power of driving and guiding the purchase decisions of the

buyers of each segment. Nowadays, the challenges presented for the fashion

industry as well as many other companies carrying footprints are many. The climate

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change is surely crucial, representing the most critical claim, especially for the

luxury industry, which relies on the rarest and finest raw materials in order to

market outstanding goods to high-end users. Anyway, in the medium term, diverse

climate changes may disrupt nature-based systems as well as ecological processes

from which many of the above-mentioned raw materials derive. This dangerous

scenario may compromise and affect the value propositions of fashion luxury

brands. Given these risks, it is indispensable that luxury fashion firms along with

the other companies having global footprints develop a strategic approach in order

to successfully face the challenges posed by the climate change to their business

and across their entire supply chain. In light of this, in 2015, 87Business for Social

Responsibility (BSR), a global non-profit business network and consultancy

dedicated to sustainability, proposed a resilience wedge approach outlining a set of

actions for the public and private areas, in order to meet the goals of keeping global

warming under control. In BSR’s section dedicated to the Climate Framework, it is

argued that luxury fashion firms should invest in the construction of a resilient

strategy. On one side implementing coordinated systems and actions, which enables

the single firm to reduce elements dangerous for the climate change and on the other

side building a flexible capacity as a prevention of impending climate impacts on

their business. As previously discussed, approaching sustainability in a strategic

sense involves the entire 88value chain: starting from the commercial subsequently

arriving to the customer and finally to the management of a product’s life end in an

increasingly complex network. The empirical evidence demonstrates that the

higher-performing firms within the sustainability matter, are the ones, which are

capable of combining sustainability aspects within the process of governance as

well as revising their business models in order to catch the opportunities of growth

offered by the sustainable approach. But what about the luxury industry? The

connection between luxury and sustainability may assume several characteristics,

87BSR™ works together with 250-member companies for the development of sustainable business strategies and solutions through consulting, research, and cross-sector collaboration. 88A business model that indicates all the activities necessary in order to create a product or service. For companies producing goods, a value chain includes the stages that involve bringing a product from conception to distribution, and everything in between, such as procuring raw materials, manufacturing functions, and marketing activities.

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which are notably relevant. On one side, sustainability is considered as an added

value to the existing luxury product: the prestige of a luxury product is indeed

reinforced by further increasing the exclusivity of the brand as well as its perceived

value. In this respect, several large groups, for instance, Hermès, Vivienne

Westwood, and Gucci, followed this path by producing sustainable goods. On the

other side, instead, the concept of sustainability may be assumed as an authentic

origin of luxury. In the sphere of business experience, recently, niche products tend

to rotate around the advancement of sustainable elements concerning the production

line, such as particularly valuable raw materials on which a specific luxury brand

is constructed. In this situation, the sustainable value does not represent an increase

in the perceived value of the pre-existing product, but the generation of an exclusive

possession instead. This last aspect turns out to be specially affirmed and could

drive to the definition of new business models arising from the existing natural

resources as well as their link with the territorial matters and local characters. This

is the case of Brunello Cucinelli, Ermenegildo Zegna, and, more recently, Prada:

well-known Italian high-end brands. In light of this, the conception of inter-

organizational outcomes in order to create outlines for sustainable solutions may

serve as a promoter of new brands born under the sign of sustainability from both

a social and ecological point of view. An emerging and important element that can

be extrapolated from the above analysis concerns the strict link built between the

acceptance of a sustainable approach and innovation. Indeed, sustainability

represents one of the most relevant supports belonging to innovation from a

technological, commercial, organizational and social point of view. The attention

drawn to the concerns of sustainability, primarily environmental matters,

automatically leverages on the business models adopted by luxury brands opening

interesting areas for the definition of new supplies that influence the product

information as well as the supply relationships and branding policies. In this kind

of scenario, a particular consideration is put on the 89Green Supply Chain

89 The combination of environmental thinking and supply-chain management. This comprehends the product design, material sourcing and selection, manufacturing processes, delivery of the final product and end-of-life management of the product after its useful life.

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Management (GSCM), considered a source of competitive advantage, which

implies renewed manufacturing relationships led by principles usually related to the

“three Rs”: Reduce, Re-use, Recycle. The selection criteria used for the supplier as

well as the means with which the supply relationships and traceability of the

manufacturing process are executed become, in fact, fundamental activities.

Approaching oneself to sustainability may also imply an important impact on the

development of new products and on the characterization of the tie between the

competitive positioning and the concept. Taking the textile industry as an example,

the development evolution of both production techniques and innovative

commodities represent the key elements for gaining the competitive advantage

nowadays. In this respect, the attention towards sustainability during the process of

research and development in the field of new materials, finishing and the

manufacturing process turns out to be an essential strategic element. In addition to

this, the innovation integrated with the creative process assumes a crucial role. The

point of departure for the management of sustainable change concerns brands in

search of new design systems, often seeking for the fusion of art and luxury and the

necessity to cope with the demand of ethical products and behaviours by

consumers. Hence, differentiation in terms of sustainable luxury goods involves all

the elements of the value chain, starting from the creation and design of the items

to the final distribution. Thus, the luxury world represents a great opportunity for

sustainability, which during the creative process finds the way for its highest

expression. Due to the intrinsic characteristics and the vocation to excellence

outlining the market of the fashion luxury, the latter constitutes a privileged

laboratory, which enables the analysis and observation of the socially responsible

behaviour of the firms.

3.1.2. Sustainability in the fashion luxury

Over time, mainly because of the high price sector, the fashion industry adopted

business models, which have historically given little space to sustainability. Due to

the profound changed context, the luxury fashion segment has only recently

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undertaken the challenge of sustainability. Moreover, it emerges that the business

models regarding the fashion clothing industry’s sensitivity to the paradigm of

sustainability still show certain delay in contrast to other industries, which have

been more concerned. This delay is principally due to the fact that, in the last

decades, the world of fashion has been grounded on a form of interaction with the

marked based roughly entirely on image, evocation and communication instead of

on the production process and the advancement of sustainable assets. A crucial

evolution concerning sustainability in fashion dates back to the Third Millennium

due to the emergence of new trends from the demand side. The elements

characterizing the customers have changed, and to this respect, the need for a

sustainable behaviour in the fashion market seems to be consistent with the former.

The new customer is progressively interested in receiving the signature of social

approval in a globalized environment, hence to appeal for differentiated products,

which in conjunction with the traditional intrinsic values of fashion, also appear

concerned to the quality of life. The modern consumer adds a social and hedonistic

dimension to the “beautiful and well-made product” indicating the product’s ability

to provide wellness and a social value through links with the territory as well as the

inherent knowledge and the features of the stakeholder community relations.

Finally, the percentage of consumers attentive to dimension inherent to the values

of the fashion system has further increased due to the 90economic crisis following

2008. As already explained, sustainability develops into an element of

differentiation and competitive advantage. Thus, the arguments associated with

sustainability and responsibility become compelling as they encourage fashion

companies to focus revived attention on manufacturing processes and check on

their business models committing priority to transparency, sustainable values

unified with strategic processes and manufacturing to the attention and respect of

all stakeholders. In this new scenario, the product itself assumes different features

and a new centrality and meaning. Together with their content of craftsmanship,

quality and savoir faire, intrinsic elements enhancing the product’s value such as

90Considered the worst economic disaster since the Great Depression of 1929. It occurred despite Federal Reserve and Treasury Department efforts to prevent it. It led to the Great Recession.

68

raw materials, traceability, distinct finishing and the value of the “Made In..”

become fundamental.

In light of this changed environment, fashion companies have introduced new

business models, they also created a kind of green agreement based on cooperation

and sharing objectives by reassessing the various relationships and establishing new

strategic partnerships and relation conditions with all of the players involved. A key

condition in making this possible involves a virtuous behaviour by all stakeholders,

guided by the will of sharing the phases of creation as well as communicating in an

open and transparent manner. These new business models are characterized by

some critical success factors compensating in financial performance for

investments in sustainability, such as the saving of resources used in terms of water

and energy, reduced waste of materials, lower costs of non-sustainability due for

example to legal impositions, the capacity to introduce new products and an

outstanding awareness for the relationships with the local community and

customers. It is straightforward that fashion companies’ evaluation of the economic

importance cannot neglect the attention associated with the sustainability of

investments as well as the entire chain of the manufacturing process. Some research

classified some salient points, which identify the sustainable strategic variable

capable of generating a competitive advantage for fashion companies:

• Control of the 91supply chain;

• Training, technological and financial support to the suppliers;

• Promotion of the quality of work, the training and qualification of the

employees;

• Promotion of relationships with the local community.

In this pattern, sustainability and social responsibility influence the management of

two main elements of the marketing mix, a set of marketing tools that firms use to

pursue their marketing objective in the target market. The 4P’s of the marketing

mix consist in product, price, promotion and place. In our case, the product assumes

91A network between a company and its suppliers to produce and distribute a specific product to the final buyer. It also represents the needed steps in order to get the good or service from its original state to the customer.

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a new centrality and meaning by combining the traditional contents of

craftsmanship, quality and savoir faire with other elements strictly linked to

sustainability that enhance the product value such as the traceability of the entire

supply chain, sustainable utilization or rare raw materials, and finally a stable

relationship of the product with the local community and territory. The promotion

instead puts a strong emphasis on the social dimension of strategic and product

choices. The increasing importance of the social dimension shows in fact how in

companies’ strategic vision, structures for measuring the performance of luxury

companies progressively tend to rest on the economic results, the social and

environmental repercussions. In recent years, many fashion companies begun

numerous initiatives oriented towards sustainability as well as ways of measuring

and communicating it. One striking example is the 92Sustainable Apparel Coalition

(SAC). The project’s aim consists in guiding the entire industry toward a vision of

sustainability built around three pillars: approaching multiple stakeholders for

measurement and evaluation of the sustainability performance of the product;

promoting technological innovations and the pertinent business models and

adopting new collaborative practices among the actors of the supply chain. In this

framework, it is evident that fashion companies require to invest in technologies

and manufacturing processes able to moderate the environmental impact.

Furthermore, intensifying consumers’ safety implies both the adoption of measures

to contain the risk of environmental impact as well as the reinvention of

manufacturing processes in order to enhance the materials and create products,

which respect the environment and respond to purchase choices that are

increasingly dictated by emotional elements. In fact, recently, the concept of eco-

luxury born and spread, being understood as a mean oriented to excellence through

the use of the best practices suitable to the environmental requirements. These

practices are usually associated with the previously mentioned “three R’s”: Reduce,

Re-use, Recycle. Especially during the last years, these dimensions assumed a

92An industry-wide group of more than 230 leading apparel, footwear and textile brands, retailers, suppliers, affiliates (service providers), trade associations, non-profits/NGOs, and academic institutions working to reduce the environmental and social impacts of products around the world.

70

fundamental role in the world of fashion, showing an increasing sensitivity toward

the environment and, commonly social responsibility.

Figure 1: the three R’s

Source: Gateway Mattress Co., Inc.

- Reuse: The first R refers to reusing the product by extending its life cycle,

revitalizing and reintroducing it into the market. This practice takes two forms

into the fashion-clothing industry. The first trends are toward the production of

customized, personalized items in which a return to artisanal measures and

manual processing as well as the development of the world of vintage is

observed. The second trend developed later on after the economic crisis,

consisting in the birth of points of sale and haggle of second-hand clothing and

accessories whose diffusion is usually mediated by the online network and

social medias.

- Reduce: Savings in terms of reduction in the fashion manufacturing practices

consist primarily in the energy efficiency mainly due to the possibility of

containing costs and reduce water consumption necessary for the processing of

raw materials.

- Recycle: Recycling in the textile-fashion industry is mainly driven by the

transformation of carefully-chosen 93polyethylene terephthalate (PET)

containers into continuous filaments suitable to be used in clothing as fleece,

padding, and composite materials.

93A clear, strong, and lightweight plastic that is widely used for packaging foods and beverages, especially convenience-sized soft drinks, juices and water. Virtually all single-serving and 2-liter bottles of carbonated soft drinks and water sold in the U.S. are made from PET.

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3.2. The Manifesto for sustainability in Italian fashion

As frequently explained, the areas of intervention to assure sustainability in the

fashion industry includes all the components of the value chain. In this respect, the

Manifesto for the sustainability in Italian Fashion, developed by 94Camera

Nazionale della Moda Italiana (CNMI) represents both a new way for designing a

responsible and sustainable fashion and a mean of promoting the adoption of

models of conscientious management throughout the value chain favouring the

economic system and the whole country. The Manifesto applies not only to all the

businesses, members of Camera Nazionale della Moda Italiana, but also to other

companies contributing with their know-how to the excellence of Italian products

around the world. The global challenges of sustainability are addressed through the

definition of concrete and distinctive actions needed to be taken by Italian firms.

Finally, the Manifesto is arranged according to the phases of the value chain

including horizontal principles as well. The companies and organizations that took

part in the drafting of the document are: Ermenegildo Zegna, Salvatore Ferragamo,

Guccio Gucci, yoox.com, Limonta, Taroni, Simonetta, Material Connexion,

Sistema Moda Italia, Politecnico di Milano, Università Bocconi di Milano, Avanzi

– Sostenibilità per Azioni.

The Manifesto’s areas of inquiry are ten:

1. Design: fashion firms should be compelled to the designing of quality products,

which can last for a long time and are able to minimize their impact on the

ecosystem. Thus, it is fundamental that firms are aware of the responsibilities

involved in the creative process in mixing sophistication, innovation,

functionality, performance, reliability and environmental compatibility. During

the process of procurement, when selecting the raw materials needed, such as

materials and finishes for the products, it is important to pay attention to their

environmental and social quality. Moreover, firms should also care of the

attention to the reduction of waste and rejects during the creative process,

94Founded in 1958, the National Chamber of Italian Fashion is the non-profit association that regulates, regulates and stimulates the development of Italian fashion. It represents the highest cultural values of Italian fashion and aims to protect, coordinate and enhance its image, both in Italy and abroad.

72

consider the option of using recycled and reconditioned materials as well as to

re-interpret products or parts of them and end-life materials. To conclude, the

conclusion of the product should involve a packaging, which minimizes the

environmental impact as well as waste production.

2. The choice of raw materials: firms should involve in the use of high

environmental and social value raw materials, materials and fabrics. This means

that the raw materials chosen should be environmentally-friendly ones and the

materials such as vegetable fibres should derive from traceable cultivations

having a lower environmental impact. Moreover, animal fibres, hides and fine

materials must respect the wellness of animals. Thus, in any occasion in which

it is feasible firms have to favour fibres and materials certified in compliance

with recognized international standards, protect biodiversity by avoiding the use

of materials deriving from dying species and prefer materials processed with

natural substances over those which are not. In conclusion, a fundamental thing

consists in to raising the awareness of suppliers by asking for evidence and if

necessary check that, especially in the case of developing countries, they do not

commit or allow violations of human rights in the processing stages and that

labour is adequately paid.

3. Processing of raw materials and production: the reduction of environmental and

social impacts of actions along with the recognition and fair reward of

everyone’s contribution to the product value should be imperatives for firms.

This involves first of all the control and minimization of energy consumption

and natural resources, in particular electric energy and water. Secondly, it

includes the reduction in waste production and setting up the recovery of rejects,

packaging materials and all things that can be recycled. Thirdly, firms should

rather buy energy produced from renewable sources or contemplate the option

of constructing equipment for the creation of renewable energy on their

premises. Fourthly, it is fundamental to make sure that the utilization of

dangerous chemicals as well as the risk to the environment and the workers

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involved in their use is minimized. As briefly mentioned in point two, the

selection of labour suppliers is crucial; the employment, particularly in the case

of developing countries should be established according to their capability of

applying and maintaining appropriate standards in terms of working hours and

wages, health and workers’ safety, environmental preservation and quality

standards. Therefore, workers’ fundamental rights must be respected and

protected by do not exposing the workers to situations, which might be or

become precarious to their health and safety.

4. Distribution, marketing and sales: during the process of distribution of the

product to customers firms should involve criteria of sustainability, for instance

by boosting rational and efficient shipping methods by promoting carriers

committed to the reduction of environmental impacts along with the reduction

of use and support of the reutilization of secondary and tertiary packaging

materials. The development of maintenance and repair services, which make

the product’s lifecycle longer also assumes a fundamental role. Moreover,

when carrying out marketing campaigns, the transmission of sustainability and

ethical values connected with “Made in Italy product” is a key factor. Taking

advantage of the human capital in the commercial activity is important, too;

firms need to convey environmentally friendly conducts and prevent any human

rights violation by strengthening each workers’ professional skills. Ultimately,

when structuring the points of sale, the estimation of the environmental impact,

which involves the attention to lighting systems, air conditioning and materials

is central.

5. Management systems: the management of fashion brands should be committed

to a continuous improvement in the company’s performance in terms of

sustainability, achievable by identifying goals, plans, responsibilities processes

and resources. Firms should in fact regularly assess and check the progress

towards their goals and objectives: the efficacy and efficiency of the actions

concerning environmental and social concerns undertaken by them.

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Furthermore, as a way to monitor and minimize negative environmental impacts

and secure balance throughout the entire value chain, firms may develop

management systems according to the four-stage “Plan, Do, Check, Act”

approach, represented in the figure below.

Figure 2: The Plan-Do-Check-Act Cycle

Source: Taken from The W. Edwards Deming Institute®.

6. Fashion and the National Economic System: fashion brands should support their

territory as well as “Made in Italy” products. In fact, it is desirable to constantly

imagine their company as a leading player in local development as well as

benefitting of this potential in current projects. Moreover, encouraging

handcraft and innovative productions characterizing “Made in Italy” products

as well as cooperating with other companies and stakeholders for sustainable

researches and innovation is advisable. The commitment to education and

professional training via internships along with durable collaborations with

universities and schools are also fundamental. In conclusion, firms should be

able to encourage young designers and start-ups guiding them in order to reach

the markets and surmount the very critical steps during the business’

development.

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7. Business Ethics: being an ethical fashion firm means primarily incorporating

universal values into the brand. Wherever these fashion brands operate, it is

indispensable that they apply outstanding social responsibility practices, even

as an improvement of the local regulations. Indeed, they should designate and

apply a code of ethics applicable also to sustainability policies for the

companies, by disclosing the code of ethics’ content and propagating its

principles to everybody who is involved in the business such as employees and

suppliers. But not only, being an ethical company means also to prevent

corruption in the relationships with other companies as well as public

administrations and boosting lawful culture and fair taxpayer conduct. As

previously mentioned, suppliers play a role, too: it is important to scrutinize that

they do not assume an inadequate behaviour, which may jeopardize their

reputation. Finally, it is crucial to foster the talent and merit of everybody who

works on behalf of the company along with creating equal opportunities and

giving the possibility of having a good balance between work and private life.

8. Transparency: when communicating to stakeholders their social and

environmental commitment, firms must do it transparently through use of

periodic reporting. Additionally, using the internet as a mean of promoting

environmental and social quality as well as maintaining an open and transparent

behaviour towards customers’ and citizens’ requests would surely benefit the

company.

9. Education: as previously mentioned in the Business Ethics section, fashion

firms should share, spread and enhance sustainability principles with their

customers, collaborators, suppliers, employees, along with all those people who

operate on behalf of the company. Specifically, in the case of customers, these

values should be promoted both during the purchase decisions, as they are

required to choose, and during the post-purchase moment, since they provide

feedbacks about the products determining also the word of mouth. Secondly,

firms may engage in the dissemination of responsible consumption styles

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through a commitment from and between the institutional partners and

collaborate with universities and training institutions in order to spread a culture

with sustainability core values among young people. In conclusion,

participating in several partnerships would help to intensify and multiply

sustainable attitudes also outside the industry.

10. Bring the Manifesto to reality: firms should communicate and transmit to their

customers, collaborators, suppliers and local communities that they comply

with the Manifesto. Advocating the guide activates a virtuous path aimed at a

gradual compliance with all the actions proposed. Moreover, it would be helpful

to initiate labs for exchanging good practices with other businesses in the

industry having endorsed the Guide. As previously explained, a periodical

publication of a report in which firms explain how they interpret and apply the

Manifesto and what is their progress towards the adoption of the proposals

contained in the Guide, is fundamental.

Camera Nazionale della Moda Italiana (CNMI) is committed to the development of

a program of activities designed for the spread of the Manifesto and the increase of

the number of supporters through fashion-shows, fairs, events, conferences and

Web platforms. In addition to this, CNMI is committed to the discover of

mechanisms through which good practices can be recognized. Finally, CNMI is

committed to enlarge the number of institutional partners in order to boost the

approval of the Manifesto also by fashion companies.

3.3. Stella McCartney: The pioneer of sustainability

This last section deals exclusively with the case of Stella McCartney, probably the

emblem of sustainable luxury. Stella McCartney was born in September 1971 to

former Beatle Paul McCartney and Linda McCartney. She launched the

homonymous Maison in collaboration with 95Kering as a 50% joint venture. The

95 Kering is a global Luxury Group, responsible for the development of a series of renowned fashion, leather goods, jewellery and watchmaking fashion houses.

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Stella McCartney brand born during the month of October of the same year, when

Stella showed her first women Ready-to-wear collection in Paris. Today, there are

51 Stella McCartney mono-brand boutiques around the world, including

Manhattan, London, Los Angeles, Rome, Paris, Milan, Tokyo, Shanghai and

Beijing. His collections are distributed in over 77 countries thanks to a network 863

retailers such as department stores and are available online in 100 countries

worldwide. Stella McCartney’s target market is represented by high-end consumers

able to afford high-quality products and pay a premium price. But not only, they

are also consumers who are environmentally conscious in buying the right thing

and do not only pay attention to appear fashionable. The word sustainable is what

probably shapes the brand best, thus, I would like to introduce first of all Stella

McCartney’s mission statement, as it embodies the core ideas discussed as far: it

defines itself as a business committed to engage in a modern and responsible

fashion. The brand defines itself as an agent of change, which is committed to

modify and push boundaries in order to produce luxury products that fit for the

world we are living in today as well as for the future. Products should be beautiful

and sustainable, with any compromises. The Stella McCartney brand never uses

real leather, skins, feathers or fur, it instead continuously searches for alternative

materials to use by cutting edge technologies, shifting towards circularity,

preserving forests, at risk and ancient, and measuring their impact with innovative

tools such as the Ecological Footprint, discussed in Chapter 1. Moreover, the brand

is absolutely against animal testing, angora, sandblasting, Syrian, Uzbekistan or

Turkmenistan cotton and many other things, which will be discussed during the rest

of our analysis.

3.3.1 Respect for people: Social Sustainability

Stella McCartney has strong values also in the field of Social Responsibility, an

argument, which has been long discussed in the first chapter. The brand wants to

have a positive impact on everyone who is directly or indirectly involved in the

company: people making clothes, farmers growing the crops for their materials,

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employees and customers. Being perfectly in line with Corporate Social

Responsibility’s principles, respect, dignity and a fair remuneration for all those

people belonging to the supply chain are fundamental to the brand. Moreover, the

brand is committed to the creation of a modern and resilient supply chain providing

desirable jobs, fostering people’s skills, strengthening worker’s voices and

advocating for vulnerable groups. In 2012 Stella McCartney also became member

of the Ethical Trading Initiative (ETI96), a leading alliance of companies, trade

unions and NGOs, which promotes respect for worker’s rights all around the world.

Since that year, it reports annually its activities and progresses in this area to ETI.

Being a member of ETI, it also adopted the ETI Base Code as their Code of

Conduct. This is a globally accepted code of labour practice set up on the 97

International Labour Organisation’s (ILO) practices.

3.3.2 The supply chains, supplier audits, training and improvement projects

Stella McCartney’s materials are sourced, and its products manufactured with an

attentively selected network of suppliers based around the world. Many of them are

working with the brand since it was founded, in 2001. Italy surely represents the

biggest sourcing country with 76% of all the brand’s manufacturing and material

suppliers. Other key sourcing countries far smaller are Spain, Portugal, Hungary,

China and India. Clearly, ethical audits are not the only means of investigation, but

it is an effective tool in order to gain insight and understanding the first layer of

information about the brand’s manufacturing suppliers. Besides ethical audits, the

firm adopts varied types of audit, which depending on the circumstances include

also unannounced ones, helpful in understanding the way in which manufacturing

suppliers work and spot potential risk areas. The audits are conducted either by the

Kering audit team or by meticulously selected specialist third-party auditors.

96 The Ethical Trading Initiative (ETI) is an alliance of companies, trade unions and voluntary organizations. ETI is committed to improve working conditions for people who grow raw materials or produce goods. 97 The only tripartite U.N. agency, since 1919 the ILO brings together governments, employers and workers of 187-member States, to set labour standards, develop policies and devise programmes promoting decent work for all women and men.

79

Additionally, the brand gives training to its suppliers on its requirements as well as

common social sustainability challenges. In the case in which suppliers find it

difficult to complete the remediation work identified through audits, they are kindly

invited to participate in supplier improvement projects: an aid for suppliers to

comprehend and address the origins of specific issues and to develop systems that

prevent such events to happen again. Whenever possible, it collaborates with other

brands and local stakeholders to maximise its impact and sustainability of

improvements.

3.3.3. Measuring and reducing the brand’s impact

The decision-making tool used by the brand is the so-called Environmental Profit

and Loss (EP&L), an innovative tool developed by Kering Group, which goes

beyond traditional environmental reporting, enabling to measure and recognize the

effect on the environment. Stella McCartney adopts the EP&L method as a measure

of every single part of the business, from the raw materials used to the process of

production and the sale in the boutiques. It is possible to think to the EP&L as a

sort of 98natural capital accounting, which measures the firm’s greenhouse gas

emissions, water pollution, water emission, air pollution, land use and waste around

the entire global supply chain. Subsequently, the firm’s impacts are reworded into

a monetary value allowing it to discover the hidden costs and benefits generated

from the practices adopted by the firm. Precisely, the EP&L works on three steps:

1. The environmental footprint quantification of a business’ direct operations and

supply chain through the six impact areas described above;

2. The estimation of the possible environmental changes, which could result from

these emissions or resource usage such as the climate change;

3. The evaluation in terms of capital of the variation in people’s wellbeing such as

health impacts, due to these environmental changes.

98 Natural capital can be represented as the world’s stocks of natural assets, for instance geology, soil, air, water and all living things. Natural capital is recognized as a form of capital, such as human, financial and intellectual capital.

80

Clearly, this process is a driver of innovation and improvement, which enables to

behave better and take sustainable decisions in each phase of the value chain.

In fact, since 2012, Stella McCartney is significantly reducing its environmental

impact thanks to the adoption of the EP&L. For instance, the brands EP&L reported

in 2014 that cashmere utilisation accounted for 42% of its total environmental

impact at the raw material phase, even if cashmere represented only 0.1% of all the

materials used. This led the brand to cease the utilization of virgin cashmere using

instead reengineered cashmere yarn. The improvements came immediately to the

surface, for instance, the total environmental impact at the raw material stage

decreased to 11% of the total impact even if they were using larger amounts of

cashmere.

3.3.4. The 2016 EP&L results

The chart below, exhibits the disposal of the 2016 EP&L impacts across the

different tiers of the firm’s supply chain. In that year, the firm’s global EP&L was

€6.97 million. The most compelling burdens are concentrated in the raw material

production stage accounting for 62% of the total EP&L in 2016. Compared to 2015,

the overall quantity of raw materials used was 5% higher in 2016, but the total

EP&L impact was only 2% higher than 2015 and the repercussions of the raw

material production stage of the supply chain actually decreased by 8%. In 2016 the

total amount of cashmere usage was 34% higher compared to 2015: anyway,

overall, the environmental impact linked with cashmere use decreased by almost

20%. Clearly, the use of animal fibres represents the main contributor in the supply

chain because of the necessary land in order to raise animals and the greenhouse

gas emissions discharged during animal breeding. In order to address this impact,

the brand formulated two alternatives. On one side, it has set farm specific projects

in order to assure that the wool used comes from farms meeting the highest animal

well-being measures. On the other hand, it is advocating and partnering with

innovators for the creation of new forms of these fibres.

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Figure 5: The distribution of the 2016 EP&L impacts

Source: Stella McCartney2016 Environmental Profit and Loss Account

3.4. Moving from waste to circularity

Stella McCartney idea consists in the elimination of the concept of waste, deriving

from the fact that the systems we rely on operate essentially in a linear manner,

extracting enormous amounts of non-renewable resources to produce goods whose

destiny are landfills or incinerations. The future of fashion is instead circularity: a

circular economy goes far beyond the current business models consisting in take-

make-dispose and aspires at the redefinition of growth concentrating on positive

benefits for the entire society. It consists of three main foundations: design out

waste and pollution, retain products and materials in use and regenerate natural

systems. Thus, it is fundamental to abandon the consumption of non-renewable

resources in favour of designing waste out of the system. Into a circular economy,

materials are broken into two categories: technical and biological ones.

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- Technical materials; they are inorganic or synthetic materials manufactured by

humans and thus deriving from non-renewable resources, such as nylon,

polyester, plastics and metals. Anyway, they can be recycled and re used several

times without losing quality. In the figure below, the technical cycle is

described. Figure 3: The Technical Cycle

Source: Stella McCartney Website

- Biological materials; they are materials coming from renewable resources such

as soil and water, thus they can be decomposed into the natural environment

without negatively affecting it, instead producing food for microbiological life

and bacteria. Figure 4: The Biological Cycle

Source: Stella McCartney Website

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3.4.1. Circular solutions

- Recycled nylon and polyester: as already explained, the ultimate goal of Stella

McCartney consists in turning waste materials into something luxurious and truly

circular. Synthetic materials, for instance nylon and polyester are in fact recycled

and arise from recycled resources. The brand is switching their current nylon in use

to ECONYL® regenerated nylon, in order to stop the use of virgin nylon by 2020.

ECONYL® turns waste such as industrial plastic, waste fabric and finishing nets

from oceans into resource, by recycling and regenerating these materials into a

brand-new nylon yarn having the same quality as virgin nylon. ECONYL® is used

for the whole collection of Falabella99 GO bags and the outerwear. Concerning the

use of recycled polyester, whenever it is possible, the brand is using fabric made

from recycled water bottles for all its handbags since 2012.

- Recycled or recyclable metals: the brand is also trying to reduce its environmental

impact due to metal consumption, through the investment in low-impact, recycled

or recyclable metals. The production of the Falabella bag chain for instance

involves a lot of metals, made of brass, a mixture of copper and zinc. Anyway, the

2016 EP&L report showed that brass is one of the most impacting materials,

accounting for 97% of the total metal impacts. Thus, the brand developed a

stainless-steel and an aluminium alternative used for some chains. These have a

lower environmental footprint since there is no copper mining involved and they

use more sustainable coating processes.

3.4.2. Respect for nature

- Regenerated cashmere: the brand’s environmental impact connected to the use of

cashmere was reduced by 92% since it stopped using virgin cashmere, a danger for

the environment. In fact, their knitwear is composed of re-engineered cashmere,

able to provide the same soft and insulating qualities as cashmere, but with no

environmental impact connected with animal raising. Re.Verso™ is regenerated

cashmere taken from post-factory cashmere waste in Italy, first and only platform

99 Stella McCartney iconic bag

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for re-engineered cashmere materials for fashion. The cashmere waste from

factories are sorted by hand, thus involving an expert touch to classify the

diversities between a variety of different fibres. Since most of Re.Verso ™ yarn is

not dyed, the materials are sorted by colour and fibre, before being sent for testing

to ensure the content of fibres and chemical safety. Re.Verso ™ is also GRS (Global

Recycling Standard) certified, which guarantees that all recycling phases are

traceable and verified.

- Viscose coming from sustainably managed forests: the brand attentively sources

its viscose by paying caring of the protection of forests as well as the species living

there. Additionally, it traces all its viscose back to its forest of origin assuring that

it derives from protected and enriched ones. Their primary viscose supply chain is

wholly identifiable, transparent and entirely European. They rigorously source pulp

from trees that come from an FSC-certified forest in Sweden, which is neither

ancient nor threatened. In this respect, they also established a partnership with

Canopy, an NGO promoting effective solutions in order to protect ancient and

endangered forests. The pulp is after transformed into a viscose filament in

Germany and finally made into fabric in Italy, ensuring that the brand does not

represent a danger for the forests, neither directly nor indirectly.

- Organic cotton: organic farming born with social entrepreneurs, farmers and

NGOs due to the overuse of pesticide, fertilisers, biodiversity loss and the social

problems, for instance farmer debt and diseases caused by chemicals generated by

production practices of conventional cotton. The use of organic cotton does in fact

support biodiversity and healthy ecosystems, helps to alleviate climate change

through the increase in the ability of soils to sequester carbon, eliminates the use of

toxic and constant chemicals boosting soil health and increasing water

conservation. The adoption of organic cotton farming does also solve the farmers’

problems through better livelihoods such the increase in their incomes due to the

premium prices paid for organic products and a better health thanks to the

abolishment of pesticides and chemical fertilisers. For these reasons, Stella

McCartney is continuously increasing the amount of certified cotton used in the

collections: in this moment in time, the use of certified organic accounts to 61%.

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3.4.3. Respect for animals

- The fur-free-fur: since the brand was born in 2001, they never used and won’t

never use real fur for their collections. Fur is first of all cruel, 85% of the fur

industry’s skins originate from poor animals threatened with cruelty in the factory

farms. These farms have generally thousands of animals living recurrently in

terrible conditions, because in these circumstances profit is much more important

than animals’ welfare. Furthermore, besides the brutality towards animals, fur may

be also highly dangerous for the natural environment and workers, since it involves

the use of several toxic chemicals for the conservation and dyeing. For these

reasons, after several debates, Stella McCartney introduced faux fur in its design: a

product looking and feeling equivalently to real fur without any cruelty component.

- Innovative ways to create silk: during the years, Stella McCartney used a mixture

of traditional silk and Peace Silk, similar to the commercial one, but the silkworms

turn into moths and emerge naturally from their cocoons. Anyway, the brand

experienced some problems with the use of Peace Silk due to the difficulty in

sourcing the quality and quantity of it. For this reason, thanks to the brand’s

devotion to sustainability, it created a partnership with 100Bolt Threads a technology

innovator. Bolt Threads is changing the future of silk: by observing the silk made

by spiders it understood the relationship between spider DNA and the components

of the fibres they produce. Thanks to their technology, they were able to replicate

this process at scale, and generate silk with impressive properties, such as high

tensile strength, elasticity, durability and softness. This revolutionary technique

enables to create cleaner, closed-loop processes for manufacturing by using green

chemistry practices. Furthermore, it causes less pollution and favours sustainability

as it is completely vegan friendly, since it is totally made from yeast, sugar and

DNA.

- The vegetarian leather: the adoption of vegetarian leather, a part of looking

beautiful, has positive effects on the environment. From the EP&L, it emerges that

100 Taking nature as their inspiration, the enterprise develops new textiles and materials that raise the bar for sustainability.

86

one of the most significant impact of real leather is the land use and greenhouse gas

emissions connected to animal rearing. Furthermore, the energy use and water

requirements of tanneries as well as water pollution resulting from chemicals used

in the tanning process also burden on the environment. For example, the EP&L

calculated that the use of recycled polyester instead of Brazilian calf leather creates

twenty-four times less impact on the environment. However, the synthetic

alternatives used by the brand are not without environmental burdens. The EP&L

showed that the synthetic fibres have a negative impact due to processing oil into

yarn: obviously they are trying to at least reduce the impact of their alternative

materials through the use of recycled and bio-based materials.

- Wool: Stella McCartney sources its wool from a small number of hand-selected

farms, attentively chosen because of their commitment to animal welfare and

environmental care. Moreover, it was the first to achieve the Gold-Level Cradle to

Cradle Certification for one of its wool yarn. This considers five categories:

material health and reutilisation, renewable energy and carbon management, water

protection and social integrity. In achieving the certification, the brand focused on

the optimization of the wool process, avoiding the utilization of pesticides around

sheep, changing the chemistry of dyes, and boosting the safety, health and

sustainability of the materials used.

87

CONCLUSION The paper’s aim was to focus on how the fashion industry is approaching the

recently changed competitive context, principally due to the challenges presented

by the environment and the new priorities driving consumers’ purchase decisions.

Consumers’ sensibility toward the concerns correlated to sustainability

dramatically increased, mostly because of the recent economic crisis. In this

framework, undertaking sustainable activities is becoming a business imperative

during the last years, especially for luxury brands, which are starting to collaborate

in ethical movements to make a tangible impact on the environment. In this respect,

CSR and sustainability play a crucial role in forcing brands to improve their

reputation and are becoming a strategic component, source of competitive

advantage for firms. Luxury companies are indeed changing their strategic

approach considering social responsibility and sustainability as a competitive

opportunity for the benefit of the single company as well as the entire industry. As

explained in my research, values such as respect for the environment, ethics, and

the attention to all stakeholders become essential in companies’ vision. Adopting

CSR policies means creating a real strategy that sees stakeholder and consumers

trust as the fundamental point: corporate communication aimed at affirming

sustainability as a fundamental dimension of the quality of the brand they produce,

and market is in fact pivotal.

Through several theories and models such as the Triple Bottom Line (TBL) and the

Manifesto for sustainable luxury in Italian fashion, it has been explained how social

and environmental concerns led to the introduction of new business models and

green agreements based on cooperation and sharing objectives: obviously, this

implies that stakeholders should act virtuously, be willing to share the phases of

creation and communicate openly and transparently, through periodic reporting.

Moreover, the attention to ethical and environmental matters extend to all stages of

the firms’ value chain, from the conception to distribution, including all steps in

between, such as the procurement, marketing and sale activities and manufacturing

processes. For instance, firms should control and minimize energy consumption

and natural resources such as water and should reduce waste in terms of packaging

88

materials and buy energy deriving from renewable sources. After a long and

detailed description of the notion of CSR, its meaning and application, a

presentation of the luxury market and how it is related to CSR has been made.

Consequently, the concept of sustainability and its connection to luxury fashion

firms has been analyzed.

In conclusion, an attentive analysis of the case of the fashion firm Stella McCartney

has been built. In this respect, it could be asserted that there exists or could exist a

strong relationship between luxury and sustainability. Her story will show how the

luxury good assumes a new centrality and meaning. Combining the traditional

contents of craftsmanship, quality and savoir faire with other elements strictly

related to sustainability that enhance the product value such as the traceability of

the entire supply chain, sustainable utilization or rare raw materials, a stable

relationship of the product with the local community and territory, it is possible to

obtain a luxury product with low environmental and social impact. Stella

McCartney’s process of production does not use real leather, sins, feathers nor fur:

it constantly searches for alternative materials with a low environmental impact,

which preserve nature such as ancient and at-risk forests. The activities undertaken

by the brand represent an exemplary lesson of how all luxury brands should commit

themselves for a better future: it is devoted to operating in a modern and responsible

manner by modifying and pushing boundaries aimed at producing luxury products,

which fit for the changed environment we are living in. Thus, thanks to the

application of the theoretical framework to an existing case, it can be confirmed

that a company can be both sustainable and economic power at the same time.

89

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