Why sustainability will be imperative, not an optional extra, in luxury brands’ coronavirus exit plans
‘I cannot wait for things to go back to normal’ is a common phrase since the coronavirus was declared a pandemic.
From a child missing school friends and trips to the playground, to a professional weathering the storm of the worst economic contraction since the Great Depression, the sentiment remains the same: now is a time of uncertainty which currently does not come with a fixed end date or neat exit plan. And uncertainty is uncomfortable to sit with.
Calls for a rapid return to ‘normal’ are clear to see in mass protests against stay-at-home measures across the US; in Donald Trump’s assertions that he will put aside the Green New Deal to “get people back to work”; in the reopening of manufacturing sites and non-essential retailers in Germany, Norway, Denmark and Wuhan.
But what is normal? As climate campaigners have aptly pointed out in recent weeks, ‘normal’ systems and ‘business-as-usual’ operations of recent years should never have been accepted as standard, given their contribution to the interconnected climate and nature crises and to mounting social inequalities.
Under a ‘normal’ scenario, humanity was over-exploiting the Earth’s capacity to produce natural resources almost twofold and emitting levels of greenhouse gas (GHG) emissions likely to result in warming of between 2.9C and 3.4C by 2100 — a far cry from the Paris Accord’s 1.5C and “well below 2C” requirements.
A recent McKinsey survey of 3,203 businesses found that only 53% integrate sustainability decisions into strategic planning. This means that for at least 47% of businesses, considerations regarding planet and people are framed as an add-on rather than a core activity. At these businesses, the cracks which were beginning to show before the coronavirus was declared a pandemic are starting to widen.
When sustainability is framed as an optional extra rather than a strategic priority, businesses can allocate the majority of their spend to high-carbon, non-circular products while greenwashing, over-emphasizing the ‘green’ credentials of initiatives limited in scope or duration. The logic behind taking this approach is clear: securing the trust and continued patronage of a public that cares more about the environment than ever before. YouGov recently found that 27% of British adults consider environmental degradation as one of the top three issues facing the nation. Similar research in mainland Europe found that 67% of citizens want stronger green legislation.
This may result in short-term profits, but in the digital age, this approach is far from airtight. Discrepancies between business sustainability pledges and investment strategies are regularly and vocally called out on social media, both by campaign groups such as Extinction Rebellion and by individuals. Such digital activism has forced changes in approach from Barclays, BlackRock and Primark , to name but a few, and has led to legal action in some cases.
Given that campaigning activities which require large gatherings have been put on pause due to national efforts to stem the spread of COVID-19, many key activist events have been moved online, from Fridays for Future climate strikes to Fashion Revolution Week 2020. The pressure is, therefore, mounting on brands in online forums. Unlike in-person events, comments made at forums can be accessed instantaneously by millions of people across the world.
The fact that such activism is continuing in these unprecedented times proves predictions that consumer pressure on both environmental and ethical issues will not abate in years to come right. This is coupled with the swathes of anger directed online at firms perceived as failing to protect the health and livelihoods of warehouse, supply chain and frontline workers. Benchmarks produced by organizations including the WBA have repeatedly shown correlation between leadership on these two fronts, meaning the losers and winners will soon be defined clearly.
In tandem with this bottom-up pressure, top-down pressure is already mounting, squeezing brands in the luxury space and beyond. Investors with trillions of dollars in assets under management (AUM) are uniting to change the flow of private finance through sustainability focused coalitions such as Climate Action 100+, the Global Investor Coalition on Climate Change. This Harvard Business Review research highlights the scale of investor pressure for sustainability.
Additionally, national banks are following suit and green legislation is experiencing a sharp global uptick in the wake of the IPCC’s special report on global warming and subsequent reports on oceans, cryosphere and land use. Citywide, statewide and national net-zero targets covered half of global GDP as of February, up from just 16% in June 2018, according to the ECIU.
These factors had all served to align sustainability with financial success, meaning landscape was already primed for a sustainability-centered transformation of ‘business-as-usual’ before COVID-19. Businesses with embedded sustainability were already 16% more productive on average, one UCLA-led study concluded. As a case-in-point, Unilever, widely regarded as the first corporation to embed CSR, saw its ‘Sustainable Living’ brands grow 60% faster than the broader portfolio in 2019, delivering 75% of turnover growth.
Transformation efforts may have been paused for a time. But key economists, business leaders and sustainability experts are broadly concluding that the brands which will weather the storm and thrive in future will bring them back to the table, stronger than ever, in recovery plans. Paul Polman, John Elkington, Maria Mendiluce, Christina Figueres and Hakan Karaosman are among those experts.
Those pushing for a return to business-as-usual will urge brands to write off sustainability as an optional added cost, as was the case in the wake of the 2008 recession (widely regarded as a wasted opportunity, given that emissions globally rose 6% year-on-year after a 2–3% drop over two years). However, those ahead of the curve know that it is a non-negotiable business activity with a proven case across the triple bottom line. It is non-negotiable, not only due to the context of mounting pressure on all sides, as detailed above, but due to the rapidly closing window left for humanity to tackle the twin climate and nature crises.
The good news is that the luxury sector is well-primed to both weather the economic fallout of the pandemic and to re-build better, imbedding sustainability as a business-critical priority. Analyses of past economic crises prove that luxury suffered less, rebounded more rapidly and outperformed in the longer-term than non-luxury. This is thanks to both their pre-existing financial models and to the tendency of consumers to assign additional value to luxury products.
Moreover, luxury brands are frequently perceived as inherently more sustainable than their counterparts both regarding resources — given that products are designed for longevity and are often accompanied by aftercare, repair services and resale — and issues such as climate change, plastics and biodiversity. These perceptions reflect actuality for brands that hold the Butterfly Mark certification powered by Positive Luxury. Companies like IWC Schaffhausen and Dior are working tirelessly to produce more sustainable packaging. Louis Vuitton renewed its commitment to the environment this year by continuing to monitor its supply chains through more than 200 audits per year. Anya Hindmarch launched an entire campaign focused on tackling the rampant consumption of single-use plastic. McQueens Flowers has built an unprecedented model that drastically limits the amount of waste often produced my florists.
Luxury or otherwise, it’s imperative brands become agile to change. It has taken a pandemic to get production, technology, finance, e-commerce, human resources, sales and marketing departments to align and coordinate for survival. To be effective post pandemic, brands must reorganize into prioritized project teams of experts with the proven expertise to innovate and build agile solutions to the most critical issues confronting the business. Brands will need to optimize the work of internal experts with that of external experts. Creating and maintaining a network of top-tier, on-demand outside experts will be one critical task for the enterprise.
Activating agile, courageous hybrid rapid-response teams of individuals who not only bring best-in-class domain expertise, but also the emotional intelligence to cooperate effectively, and hold each other accountable will be a non-negotiable requirement to operate efficiently and effectively. When the loyalty of a team member is to a department silo, the probability for conflict of interest, and lowest common denominator performance, is certain. The Industrial Age’s linear, baton-hand-off departmental model is dead. Bureaucratic brands that fail to transform from departments into agile, emotionally intelligent expert hybrid teams will be at a major disadvantage in performance, and survival, stated the Luxury Institute in its latest report
The coronavirus pandemic has evidenced both the interconnectivity of humanity and nature and how economic systems based around ‘business-as-usual’ fundamentally undermine this symbiosis. For investors, policymakers, professionals and consumers alike, these learnings cannot be unlearned. As such, demands will shift; environmental science demands that the shift be unprecedented, rapid and far-reaching. The winners of this transition will be the brands which position themselves fearlessly ahead of the curve, sooner rather than later.
Above all there are individuals, like you and me seeking a new normal and ready to vote with their money for a better future and a healthier planet.
This story as been co-authored with Sarah George