Ethical Performance
inside intelligence for responsible business
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luxury goods brands are found wanting

January 2008

The social and environmental performance of companies that produce luxury brands has been highlighted in a new ranking that suggests none of them are doing particularly well.

The league table has been billed as the first of its kind by its compiler, the environment network WWF, which has used data commissioned from two research bodies, UK-based Ethical Investment Research Services and Switzerland's Covalence, as well as its own analysis of publicly available data from the companies.

None of the ten businesses covered by the research scored more than 69 marks out of a possible 100, giving the three best performers a C+ grade only (see box). They are L'Oreal, which has the Lancome, Helena Rubenstein and Kiehl's brands within a luxury products division; Paris-based Hermes, (leather goods, fashion and perfume), and LVMH, the world's largest luxury goods conglomerate, which has the Tag Heuer, Fendi, Marc Jacobs, Guerlain and Givenchy brands.

Worst ranked were Bulgari, an Italian jeweller and luxury goods retailer, and Tods, also Italian, which manufactures shoes and leather goods. Hermes and Coach were bolstered by the fact that they avoided any negative media criticism, despite having relatively low scores on self-reported performance.

WWF plans to produce the ranking annually and to increase the number of companies covered. It says its research, which looked at performance in areas such as supply chain monitoring, the environment, product responsibility, community involvement and sustainability reporting, found that although some companies working at the top end of the market have begun to think about CSR, 'they are lagging behind many other makers of consumer products'. Much of their activity is limited to what it calls 'glam philanthropy' - raising money for charity with help from celebrities.

In a report, Deeper Luxury, that accompanies the ranking, WWF argues that luxury brands should, if anything, have more regard to their social and environmental impacts than other consumer goods companies because a greater proportion of their brand value is derived from 'empathy and trust', making them more vulnerable to challenge.

It claims that luxury brand companies can afford 'to lead innovation on social and environmental performance' because their products are less price sensitive. Among examples cited of companies that have taken this path are fashion brand Osklen, which has developed clothing in partnership with Instituto-e, a not-for-profit group promoting sustainable development in Brazil, and Tesla Motors, which makes luxury electric sports cars.

In a ten point plan, WWF calls on companies to conduct 'brand perception audits' to find out how customers feel about products being modified for environmental and social reasons. It also recommends a Global Reporting Initiative sector supplement for the £77billion ($153bn) luxury industry.

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