Sustainability
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Luxury
A brief history of ESG
Environmental, Social and Governance (ESG) was first introduced in 2004, in a U.N Global Compact Leaders Summit report, as part of a global initiative for systemic change. The goal being to promote the sustainable development of societies, by integrating ESG factors into investment decisions. The concept of ESG derives from the theory of Corporate Social Responsibility: the notion that businesses have a responsibility to contribute to the betterment of society, an idea that dates back to the nineteenth century.
Today, ESG has evolved into the primary framework used by businesses to measure the risks and opportunities inherent in their operations, as a means to assess the full impact of their activities. It involves scoring against globally-recognised standards, designed to help businesses objectively measure, monitor and report on their sustainability performance. The aim of ESG is not to constrict a business’ prospects, but to strengthen and boost resilience, thereby securing a more sustainable future for stakeholders.
The ESG framework sets out three 'pillars', against which a business measures its impact, summarised as follows -
Environmental - Its impact on the planet, in terms of carbon emissions, pollution, waste, and its stewardship of natural resources;
Social - Its purpose and values, and how it positively contributes to the lives of its employees, customers, and other stakeholders;
Governance - Its internal management practices and procedures, leadership structure, and how it is managed and directed.
A New Perfect Paradox
In 2001, Bernard Arnault, founder, chairman and CEO of LVMH, in his expository HBR interview ‘'The Perfect Paradox of Star Brands' outlined the meticulous processes and revolutionary principles central to building 'star brands', and responsible for the spectacular success of the company. The formula was faultless, evidently - notwithstanding its obliviousness of the concept of sustainability, an emergent notion at that time, which was considered rather insignificant and incompatible with luxury.
Today, a repeat of that HBR discussion certainly would highlight the paradox that sustainability poses to star brands, and to the future success of every company. Over the past decade, LVMH has sought to lead from the front, with a heightened emphasis on sustainability and the broader concept of ESG. Today, the company's website proudly states as part of its mission: "All LVMH Maisons craft products and services that strive for excellence and meet the highest ethical, social and environmental standards".
Businesses all across the sector are seeking to respond to the increasing prominence of sustainability concerns with vigor. The sector is keenly exploring new ways to dissociate itself from outdated notions of luxury, and reinvent itself by pursuing excellence across its entire value chain - from the sourcing of raw materials, to the welfare of its workforce. It has resolved to evolve; inspired by the strong new wave of social change, and influenced by modern values, and the pursuit of the conscious, elevated lifestyle deeply craved by its consumers. Today, as it positions for change, it demonstrates its enduring relevance and resilience.
The ESG Emergency
The intensifying macroeconomic climate emergency means that it is no longer sufficient to passively address ESG concerns. ESG has become an existential priority, and businesses in every sector must respond to the demands to do business more responsibly. More than ever, companies are rising to the challenge to make a commitment to ESG that covers not only environmental aspects, but also topics including: DE&I, employee engagement, philanthropy, and others. A commitment to ESG should however, not merely be about meeting a set of requirements, but about taking purposeful action to make a tangible difference for the benefit of all.
Whilst at the present time, only large companies and listed companies (except listed micro-enterprises) are mandated to disclose sustainability-related information in their annual strategic reports, a growing number of small and medium-sized entities (SMEs) have started to face increasing pressures. This is due to lenders and larger organisations being required to pursue ESG factors and provide sustainability information along their supply chain. Amid growing speculation that SME legislation will be introduced in the near future, SME early adopters are already benefitting and stand to gain further advantage from having historic ESG data.
The Benefits of ESG
As ESG reporting frameworks continue to develop, business owners are starting to discover that adopting a structured approach to ESG is a worthwhile exercise that returns tangible benefits - not only for the environment and communities, but for the business and its stakeholders. When it is done right, sustainability practices yield positive outcomes - and whilst some are realised over time, some rewards may be enjoyed immediately. Today, a growing sector of investors and other stakeholders are paying attention to companies’ ESG strategies, practices, and performance, when deciding who to conduct business with, partner with, or invest in.
The realisable benefits of ESG are comprehensive and far outweigh the costs, and may include: competitive advantage, higher sales and customer loyalty; reduced overheads, employee acquisition, retention and engagement; commercial advantage, ESG-focused investment, business resilience, and more.
When categorised under the three pillars of ESG, businesses may expect to enjoy -
Environmental - A more efficient use of energy and materials, which translates to lower overheads, as well as lower emissions and reduced climate impact.
Social - A socially responsible culture which helps to generate higher sales from ESG-conscious consumers; and attracts employees, as well as supporting retention rates and better employee engagement, which boosts productivity and output.
Governance - Robust internal controls and risk management practices which help to boost business resilience and strengthen its overall performance.
Our Mission
Our mission is to help luxury SME businesses improve their sustainability, and balance profits with purpose, through LUXE-ESG, our dedicated ESG solution, delivered in partnership with Eevery, the sustainability experts for SMEs. We are passionate about providing tailored guidance to make ESG compliance relevant, practical, and achievable for every luxury SME business.
The official sector body for UK luxury, Walpole, set out in the British Luxury Sustainability Manifesto, a firm commitment to sustainability for the sector. In the report produced in partnership with McKinsey, Walpole lays out ambitious aspirations to: lower carbon emissions, reduce the impact on the environment and ensure a more sustainable path for future growth. The report also highlights the opportunity and responsibility to play a key leadership role in the shift towards a more sustainable future for all.
It is a sustainability pledge that provides clear guidelines, aligned to 11 of the 17 UN Sustainability Goals, and seeks to envision the global challenges and solutions that will define the future era for luxury. Underpinning the policy are four guiding principles - Lead the transition towards a circular economy | Safeguard the environment and natural resources | Guide partners + suppliers towards sustainable practices | Advocate equal and respectful working conditions.
We take inspiration from the mission of Walpole, and our aim is to help luxury businesses contribute to making the UK luxury sector the most sustainable in the world. We believe in fact, that every luxury SME business globally should adopt Walpole's mission, and participate in ensuring that all luxury businesses contribute positively to a better future for all.