LVMH, or Louis Vuitton – Moët Hennessy Corporation, is the world’s biggest luxury company. The French company owns 75 different subsidiaries in six branches, like wine, spirits, watches, jewelry and fashion. Some of its houses date back centuries and carry a very rich heritage. The total revenue of these houses amounted to €53.7 billion in 2019, and provides work for over 163,000 employees. This review is based on LVMH’s performance in its fashion section, which is also its biggest branch revenue wise.
LVMH doesn’t measure the emissions generated in its supply chains. It has a target in place to have all production sites certified for environmental management in 2020, which provides the possibility to start measuring and improving environmental performance in its full supply chain. As it stands, the company only reports on emissions generated in its owned facilities. Nevertheless, the company is taking some climate action. It used 27% renewable energy in its own facilities in 2018, and aims for 30% in 2020. It requested every house to improve key environmental efficiency by at least 10% by 2020 for water, waste and energy consumption. These targets are necessary and it’s good to see them implemented, but the company doesn’t provide any significant data on its performance.
LVMH launched the COP21 internal carbon fund, which is an internal fund that all houses contribute to. At the same time, the carbon fund provides resources for projects within LVMH where it’s needed most and has been used for projects like a biomass-fueled power plant for Belvedere and a solar powered wine cellar for Chandon India. While these are great projects that contribute to the improvement of LVMH, the company has to structurally change its environmental performance to make a significant impact. This can be achieved through the use of a service like the Higg Environmental module that can efficiently measure environmental performance and allows for a data-driven approach, which can effectively reduce its climate impact. Since supply chain emissions are not tracked yet, there can’t be any meaningful reduction targets that the company can aim for. Currently, its reporting shows that energy consumption as well as waste, particularly toxic waste, is growing. All in all, there are more than enough indicators that imply the company has to step up its environmental game.
Another major factor that can reduce LVHM’s impact lies in its material sourcing. Currently, the company isn’t transparent about what percentages or numbers it uses for its total production, and traceability is very little. This is an indicator that its materials are generally unsustainable. The company reports that, in 2018, 15% of its cotton was sourced through the Better Cotton Initiative, but this doesn’t provide any details for other fibers. In terms of animal materials, there’s more information available, but it’s very worrisome. The company sources 48% of leather from the Leather Working Group, which means that about half of its leather is not certified. It also uses wool without stating its sources. Even more importantly, the company uses materials from exotic animals. Luxury is often defined by the use of rare materials. In general, these materials pose risks, and this is certainly the case with LVMH. The company uses crocodile leather, skin from snakes and lizards, and furs from foxes, racoons and other exotic animals. These materials are forbidden by almost any other fashion company, but still remain at large within LVMH.
The company has a Code of Conduct, but doesn’t provide any relevant data about third parties conducting social audits or the performance of these audits. Since LVMH has not published a list of factories or material suppliers, product origins are a mystery. Publishing where its factories are located is the first step towards transparency. Because this has not been achieved yet and LVMH doesn’t provide any relevant information about third-parties auditing its supply chain, there is a high risk of violation of labor rights in its production facilities.
It may make sense for a company the size of LVMH to conduct audits internally, develop its own systems or look for internal solutions in general. But with such a huge number of brands, supply chains, factories and workers working together to produce LVMH products, the impact the company has is gigantic. Especially since the company produces luxury products that go for high prices, LVMH should be able to show that it operates in a responsible way. With the sourcing of rare materials from high-risk countries and a general lack of transparency in its reporting, this is currently certainly not the case.
