Is sustainability the next frontier for luxury brands?
Luxury brands can no longer ignore the subject of sustainability, according to an article in Forbes magazine. Due to their expansive visibility — perhaps more than their impact — they must face sustainable scrutiny. The new generation of consumers, who, in 2018 alone, drove 85% of luxury sales growth, consists primarily of millennials and Generation Z and demands sustainable practices, messaging and products.
In the mid-2010s, purchasing attitudes shifted and began to coincide with growing ethical considerations. Arguably acting as the catalyst for change, the emergence of the Covid crisis in 2020 stimulated an industry-wide sustainable transformation that pioneered positive development in the luxury industry. As a result, large luxury conglomerates began investing in various methods to address sustainability issues.
Such initiatives include sustainability profit and losses reports and the introduction of The Fashion Pact in 2019. Devoted to achieving a common core of environmental goals in three areas — mitigating climate change, restoring biodiversity and protecting the oceans — the pact gathers a global coalition in the fashion and textile industry of over 200 brands, all committed to building a better future and protecting the planet.
Customers are fundamentally concerned with progress and the brand’s future, not only previous achievements. Luxury brands have an urgent mission to propose and introduce an approach that promises to deliver a sustainably driven tomorrow and beyond. There is no doubt that the brand business model repercussions may prove significant, but brands no longer have a choice. The question now is: Are brands ready for the transformation?
Five steps to sustainability
Some organizations are already on the road to improved sustainability and have announced ambitious net zero targets. But for others taking their first tentative steps, where should they focus their efforts?
According to David Morel, CEO of Tiger Recruitment:
Have A Plan. The priority is to understand where the business is today, identify areas for improvement and have a clear plan. Getting together a group of employees – your ‘green team’ – will help take your sustainability drive forward, while creating a plan with clear objectives will give your efforts focus.
Support Flexible Working. Office-based businesses can make a difference by continuing to support flexible working. As remote work strategist Molood Ceccarelli points out, “Without billions of people commuting every day in various countries, we are experiencing cleaner air and water and are contributing positively to the environment. A continued approach to this lifestyle has the potential to delay the destruction of our planet.”
Achieve (Home) Office Efficiency. Your sustainability efforts should factor in both the office and the home office. With buildings responsible for almost 40% of annual energy-related carbon dioxide emissions globally, your commercial office offers enormous untapped efficiency potential.
Influencing employees’ home set-up is more challenging, but sharing advice on simple energy-efficient wins can help.
Travel Less, Travel Wisely. By encouraging employees to take up greener modes of transport, businesses can also reduce their carbon footprint. A comprehensive “green” travel policy should encompass all business journeys, whether that’s to meet with a client or attend an event.
Keep Good Company. Businesses need to think beyond their own operations and consider their partners and suppliers. That means sourcing locally and sustainably. For every purchase you make or supplier you appoint, consider whether it’s the most sustainable option for your business and budget.
New global sustainability board aims to cut through disclosure confusion
The confusing world of competing sustainability reporting frameworks and standards guiding companies and investors on ESG disclosure could soon get a little simpler, according to GreenBiz.
The IFRS Foundation responsible for setting global accounting standards plans to create a new International Sustainability Standards Board (ISSB). The new ISSB will guide companies on what sustainability disclosures ought to be made to investors to supplement financial statements.
A multitude of sustainability reporting standards already exist, including the Global Reporting Initiative; the Task Force on Climate-related Financial Disclosures (TCFD); the Sustainability Accounting Standards Board (SASB), which recently merged with the International Integrated Reporting Council to become the Value Reporting Foundation; and the Climate Disclosure Standards Board — to name just a few.
The sheer number of frameworks and standards has led to confusion and inconsistent disclosure in the market.
The foundation is launching the ISSB to create standardized ESG reporting rules that will complement the IASB’s financial accounting regimen, which already requires companies to consider climate risk in their accounts when it is material.
The ISSB wants to pull all the different standards together in a format resembling an IFRS standard. The board will also seek to create “a presentation standard that would comment more generally on what sustainability information for investors should look like, whether it’s climate-related or on other topics,” she said.
The U.S. lies outside the international accounting standards set up by the IFRS Foundation. Companies based in the U.S. report under a framework created by the Financial Accounting Standards Board. But the head of the country’s chief markets regulator, Securities and Exchange Commission Chair Gary Gensler, recently said he was “struck by the call for enhanced disclosures” in the SEC’s request for comment on whether to make ESG disclosures mandatory.
The EU is also planning an update of its Non-Financial Reporting Directive, expanding its reach through a new regulation called the Corporate Sustainability Reporting Directive, or CSRD, which will require information on how a company’s business affects society and the environment.