Luxury brands need to adopt a comprehensive approach to sustainability if they want to succeed in the long term, according to a recent report by Bain & Company and Positive Luxury. The report identifies five key areas that luxury brands should focus on to effectively implement sustainability strategies by 2030.

The first area of focus is redefining brand purpose. Luxury brands need to incorporate social and environmental considerations into their management, hiring, performance assessment, pay structures, and training. This shift should be driven by the ethical expectations of Gen Z consumers, who prioritize brands that are committed to social and environmental causes. However, the report also advises brands to be patient, as the investments made in sustainability may not yield immediate results.

The second area involves decoupling growth from volume. Luxury brands should invest in circular business models, such as resale and rental, to maximize the value of their products throughout their lifecycle. By reselling the same product multiple times, brands can generate revenue and increase profit margins. The report suggests that resale could constitute 20% of sustainable luxury brands’ revenues by 2030. To support this approach, brands should invest in technologies that facilitate manufacture-to-order and streamline resale processes.

The third area highlighted in the report is supply chain transparency and traceability. Luxury brands should trace their supply chain relationships all the way back to raw material producers and consider the full impact of their activities. The report suggests making information on the supply chain readily available to customers, both online and in stores, through the use of NFC technology. Investments in technologies like blockchain, the Internet of things, robotic process automation, and data science are vital to achieving this level of transparency.

The fourth area focuses on maximizing environmental and social commitments. Luxury brands should not only set ambitious targets for issues like emissions reductions and diversity but also challenge themselves to go further once these goals are achieved. Inclusivity should be deeply ingrained in the brand’s core values, from management and hiring practices to marketing strategies. This area emphasizes the importance of continuously striving for improvement in environmental and social performance.

The final area highlights the need for luxury brands to view sustainability as a source of economic value rather than an additional cost. The report recommends maximizing incentives that align with national initiatives for greenhouse gas emission reductions, regenerative agriculture, reforestation, and community projects. By embracing these initiatives, luxury brands can qualify for maximum tax relief and demonstrate their commitment to sustainable practices. The report also suggests adopting reporting reforms and cutting-edge metrics to showcase how sustainability is generating value for the company. Shifting to annual reporting and presenting a clear narrative can attract investors who prioritize environmentally and socially responsible companies.

To conclude, luxury brands must adopt a holistic approach to sustainability in order to thrive in the future. By redefining brand purpose, decoupling growth from volume, ensuring supply chain transparency, maximizing environmental and social commitments, and recognizing the economic value of sustainability, luxury brands can position themselves as leaders in the industry while making a positive impact on the planet and society.

Useful links:
Transforming the Luxury Industry Through Sustainability, Beyond the Crisis
Positive Luxury