Capstone Research Project - MBA by Smruti Thakkar

WRITTEN BY

SMRUTI THAKKAR

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY

MBA IN LUXURY BRAND MANAGEMENT | IFA - INTERNATIONAL FASHION ACADEMY PARIS; FRANCE.

ContentS

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

01 Questions of concern 03 Introduction 05 Abstract

Chapter 1: 07 09 11 14

What is transparency? Case study 1 Components of transparency Case study 2

Chapter 2 : 17 Customer Segmentation 18 Customer Target

Chapter 3 : 23 Importance of Sustainability development 25 How can we obtain sustainability development? Carbon Neutral economy : • Circular economy • Sustainability assessment • CSR • DPEF 35 Facts & Figures

Chapter 4 : 39 42 44 47

Importance of Transparency in Leadership Importance of Transparency in Consumer/ Society Risks faced by Luxury brands in embracing transparency Scope/Opportunities for luxury brands in embracing transparency

Chapter 5 : 51 Overview of Survey conducted 54 Conclusion 56 Appendix

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

QUESTIONS OF CONCERN

W W

hat is sustainability? hat it includes?

ow transparency is not possible without sustainability?

ifferent elements of transparency

eeds of consumer

pportunities in embracing transparency for brands

isks of sharing all the information

ow being sustainable

& being transparent about it has

became the new essentials for luxury brands

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

02 02

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

Introduction

ny company’s first goal in the midst of the coronavirus pandemic is to protect the health and safety of workers, consumers, and business partners. Indeed, luxury businesses have pivoted to meet urgent public health needs: factories are now making face masks and hand sanitizer for scarves and perfume manufacturing, and several luxury organisations have made c haritable contributions to hospitals and other non-principal donations. At around the same time, with millions of people making a living relying on the luxury goods industry, industry leaders are planning ahead and grappling with long-term competitive challenges to ensure the viability of their enterprises, from factory employees and department store staff to small-town craftsmen and craftsmen. Sales for the spring season this year are as much as 70 percent lower than last year, not surprisingly, given that shoppers had little time in stores to sample the spring and summer collections. Today, e-commerce accounts for just 10 per cent of watch sales and 5 per cent of jewellery and eyewear sales, leading to the extreme decline in international travel. And over 40 percent of the world’s production of luxury goods occurs in Italy, and all Italian factories have temporarily packed up, including small, family-based producers. The global luxury industry has expanded twice as quickly as the global GDP. 30 percent of the luxury market, or EUR 278 billion, was produced by True-Luxury consumers. Millennials, a market group, are characterized as shoppers where luxury is about the latest trends, quality and customization with global aspirations. Meanwhile, at the moment, the generation projected to replace millennials comprises just 4% of the private luxury sector, but Gen Z buyers display attitudes and beliefs that will set the tone for the luxury industry in the long run. Today, Gen Z represents just 4% of non-public luxury, but has a clearly distinct set of attitudes and principles that should be better tracked and recognized by brands (i.e. Buy > partnerships, > sustainability-influenced, ..). Millennials expected an increase in the non-public luxury market from 32 percent to 50 percent by 2025.

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

The 3rd decade of the new millennium starts in 2020. Since then, the private luxury goods sector has doubled from EUR 128 billion to EUR 281 billion, reflecting a CAGR of 4.1 percent. The non-public luxury goods sector of clothing, fashion accessories, cosmetics, jewellery and watches has progressed through five stages of development over the last twenty years: Democratization (2001-2007); Recession (2008-2009); Chinese Shopping Madness (2010-2013); Reboot (2015-2016); and now the New Normal (2017 onward), Pandemic (2015-2016); (2020 onwards). However, there are many unforeseen obstaclesfacing the luxury market that will turn the outlook for 2020 from the predicted New Normal cycle into something very abnormal. Depending on their exposure within the luxury industry, these threats are likely to affect individual markets differently, but the online effect may also be major disruption on a world scale. An imminent recession is threatened by uncertainty in global markets and political upheaval. Even the affluent twinkle my thumbs when things are unsettled. Purchases are postponable luxuries. The confusion that engulfed them just made them curl their thumbs and wait. There are so many businesses that offer so-called ‘luxury products.’ Accessibility has saturated the market because businesses manufacture a commodity, label it as luxury, and they go away. The opportunity is to return to the main pillars of luxury: quality, craftsmanship, design, attention to detail, individuality, and authenticity, as the sense of luxury not well known by many buyers, or evenamong luxury companies. Many successful businesses are going back to the concept of true luxury. For luxury brands, the challenge is a way to demonstrate their true luxury values. As well as the rise of celebrity culture and paying influencers, social media have created brands that dilute the real luxury world. The definition of what luxury is is drawn down by influencers. They do not embody rareness, exclusivity, or craftsmanship. In their latest study, the global fashion program, Lyst, announced a 47 percent rise in searches for “vegan leather” and “organic cotton.”

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

ABSTRACT:

or the luxury sector, sustainability issues have become a challenge, especially the words “sustainability” and “luxury” have been regarded as non-compatible, or even as two opposite concepts. Luxury brands noticed, however, that more attention was paid to the environment by many customers with high buying power. Luxury brands are shifting to sustainability and the idea of “sustainable luxury” is evolving as the sense and added value for buying a luxury product. The perceived inconsistency between luxury and sustainability essentially depends on how consumers interpret sustainability. luxury. Sustainability is a development that meets the needs of today without undermining the ability of future generations to meet their own needs. The three pillars or dimension of sustainability is Environmental, social & Economic. It is very important for the brands to be transparent about their actions leading to sustainability is Environmental, social & Economic. It is very important for the brands to be transparent about their actions leading to sustainability. Even if the brand is taking positive actions for environment and society, no one can get to know or trust this actions unless it is visible or transparent to the consumers. Many companies still hesitate to share the companies crucial information related to their productions, supply chain, labour, raw materials or technology. They are still not close to become fully transparent about their whole range of practices, actions and products.Because of consumer trend of requiring transparency from brands have made brands to disclose certain information about the product, fair trade practice certification, organic certificatiout very little information about how they treat employees, their impact in the community and the environmental footprint as a company. This has made it very difficult for the people to identify whether they are a good company or it is just a good marketing. Whether it is for marketing or for other reason, all the brands are working and finding innovative solution to embrace transparency in their business model.

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

CHAPTER 1 TRANSPARENCY & ITS COMPONENTS

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

LITERATURE REVIEW: What is Transparency?

ransparency is that accurate, detailed and comparative data and information about fashion supply chains, market practices and the consequences of these practices on employees, communities and the environment are made publicly accessible. Transparency is literally sharing the beautiful work that brands do. Many times, without sharing much information about the products that fail, we see brands sharing information about their corporate principles and positive strides and thus the difficulties they faced, and thus the actual outcomes of their attempts to uphold human rights and the environment. For almost all the brands, this results in greenwashing. Also, it is not appropriate for those stakeholders to reveal their supply chain information only internally or selectively. Brands have been doing this for a very long time now. True transparency requires disclosure by the public. Transparency helps people to look at what corporations think they’re doing to protect the environment and comply with human rights. This information provided by the brands allows investors, journalists, customers, NGOs, lawmakers and employees themselves to keep brands and retailers accountable for their practices and policies, particularly if they get it wrong. Being transparent does not indicate that corporations conduct themselves in a manner that is very ethical and sustainable. A organization can publish a large amount of data on its practices, processes and results and still contribute to hazardous working conditions and environmental degradation. In the other hand, brands may also do excellent work to make improvements behind the scenes, but if they can not share this information freely, no one can understand it, and this learning can not be shared more extensively for those who may find it useful.

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

Case study 1: Rana Plaza collapse, Bangladesh

Plaza, an eight-story garment factory in Bangladesh, collapsed on 24 April 2013, killing 1,100 and 29 employees and injuring more. The collapse of Rana Plaza to date is the worst industrial accident to take place in the ready-made garment sector in Bangladesh. Man-made/technological disasters are the result of a man-made mechanism that causes damage to property and thus the environment as injury and/or loss of life as a result of human error, incompetence, or failure. The fall of Rana Plaza internationally highlighted not only the conversation about corporate social responsibility, but also shed light on the conditions under which employees produce apparel for Western and European companies and customers. People had to search through the debris trying to locate clothing labels in order to find out which brands in each of the five clothing factories operating inside the building were manufacturing clothing. At any given time, brands and distributors may go with hundreds or even thousands of factories, which are simply the suppliers that cut, stitch and assemble our clothing within the production finish. Further down the chain, there are many factories and facilities that knit, dye, print and finish fabrics, spin yarn, and farms that produce fibres used in our clothes. ana

Throughout the worldwide fashion supply chain, after Rana Plaza, catastrophic and fatal factory fires and injuries, poor and exploitative working conditions, pollution and environmental degradation remain widespread. Simply put, if we don’t know where our clothes are made and by whom, then it’s hard for relevant stakeholders to work together to fix problems before they end in tragedy

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

#WhoMadeMyClothes The tragic event has given rise to accountability. More and more buyers and NGOs have now stumbled on the “#WhoMadeMyClothes” sustainable trend. Consumers now want to understand who made their clothing. Recently Business of Fashion wrote, “Fashion companies must come to terms with the very fact that a more distrusting consumer expects full transparency across the worth chain... consumers became more active in scrutinising the brands they are doing business with.” If buyers are provided with more accurate and higher quality information on the social and environmental effects of the clothing they purchase, they can make better informed choices. As a consequence, transparency creates trust among the products they purchase and a lack of transparency will harm the reputation of brands.

What it includes?

ransparency or ‘making visible’ is variously synonymous with greater transparency, the other with confidentiality and clear information disclosure actions, while there are abundant definitional debates and disagreements. Increased transparency is seen to promote, among other things, more responsible, democratic and efficient decision-making and behaviour across the brand & society focused on sustainability. Transparency consists of the complete and complete ability to demonstrate and explain each step of building something, what comes into it, what comes out of it, and therefore the social and environmental effects of those processes. Brands should be able to share in clothing, from the cloth to the buttons, rivets, zips, laces, eyelets, who makes them, how they are handled, delivered, what happens to the clothes at the end of the time, where the fabrics

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

come from, how they are grown and by whom, where each individual item is made. Transparency is also an acknowledgment of what goes through the organization removed from the actual making of the clothes, who is accountable and how all this information is available. Unfortunately, this is not standard practice, the style Transparency Index from the Revolution style meticulously analyses big brands (those with turnover of over $400 million), rating all transparency areas informed to them. And there was a median overall score of 23 per cent with 250 brands, from H&M to Tom Ford, with several well-known brands ranking 0. Sustainability isn’t nearly the luxurious brands, surprisingly plenty of small brands who have potential to become a premium or luxury brands have incorporated sustainability as their core value & the story of the brand. they’re radially transparent in context of the assembly process, how the materials are sourced and where they’re made.

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

Case study 2: EVERLANE

VERLANE is a fashion brand with minimalist basics that targets the ethically inclined. Everlane was launched eight years ago with the basic premise that to come back to the forefront, the style industry and retail usually really required clarity and authenticity. The brand spends months locating the world’s most productive factories to ensure that they develop good personal relationships with the owners. Each factory is also audited to ensure that it meets the expectations, aligns with its social and environmental principles, maintains fair salaries, reasonable hours and the environment. you’ll search on the Everlane website to seek out details of every individual factory, from where they’re, what they produce, what number employees they need, and who owns of the factory. This isn’t something we see that often, we might call it radically transparent. Further transparency by Everlane is seen within the way they share the value of every product with their customers. They share the price of every step of the journey, from the materials to the labour and transport, yet as what the standard retail mark-up would be. By sharing the prices by each individual item on their site, the customer is in a position to work out the profit the brand make on the garments, and what it might be if retailed elsewhere, empowering you to create the choice supported transparency. [5] This “radical transparency” vision was so convincing that Everlane officially took in $50 million in sales after just five years and demanded a fairly $250 million valuation. Clothes could be a gloomy industry. Most likely, you don’t know where your T-shirt was made, and you definitely don’t understand the cost of making it. The target of dubious supply chain ethics has been Ralph Lauren, Nike, Adidas and almost every retailer. Moreover, you still have no idea why a $50 jersey costs twice as much as a $25 jersey. Are you charged an additional

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

quality surcharge? Everlane came up with a response of being Radical Transparent to induce this barrier. The task of Everlane is brief and understandable, packed for his or her clients to listen to, quickly remember and share. They elaborate a small amount more: “Know your factories. Know your costs. Always ask why.” The mission was crucial to their success. Without this mission, they were an undifferentiated apparel company. Everlane’s mission is to restore transparency, pricing and chain provision to a fractured apparel industry. Today, every aspect of their brand speaks to this. Everlane’s brand name is intentional, concise and clean. You get the sensation while browsing Everlane.com: tidy and insightful. Everlane raises the curtain during the entire process, revealing the supply chain and costs for each garment they produce. Everlane has one of the easiest social media marketing strategies. There are posts that are pretty clear & noisy on Instagram about what they do. In reality, they are informative on their Snapchat account where they post stories about their personalities behind the scenes, facotires, packaging & loads. They also started blogs about a

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

CHAPTER 2 Customer Segmentation 16

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

Customer Segmentation:

onsumers express strong positive and negative feelings towards luxury. The word luxury is automatically associated with phrases such as upscale, high-end, productivity, dignity and sophistication, as well as flashiness, bling-bling and bad taste. It is clear that luxury goods fulfil one’s needs, not only functionally, but also mentally. Luxury is defined by different people in various ways because of the fluidity of the word. Many people think that the understanding of the concept of luxury takes several forms and depends on two key topics: the meaning and the targeting of other people. Therefore, luxury is usually considered a subjective matter. [6] A luxury value model consisting of 4 key core dimensions of luxury value experience is used to differentiate the relationship between value perceptions and luxury consumption in many clients. The financial dimension is the primary dimension. It is related to the monetary dimensions of luxury consumption and discusses the basic price of such items. Functional measurements are the second component. It focuses on the merchandise’s main advantages and basic services. This aspect involves elements of individuality and also dimensions of consistency. That dimension is the dimension of the entity. It introduces the elements of the personal point of view of consumers against luxury consumption when discussing personal value. The social dimension is the final dimension. It reflects the perceived value of customers within a particular group against luxury products, which can have a powerful influence on the evaluation and the willingness to purchase luxury brands. The perceived conspicuousness, as well as a luxury brand’s perceived extended self, fits into the last dimension.

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

CUSTOMER TARGET :

Millennials: They are between the ages of 23-36 and are now well into their careers and approaching their age of peak spending. This is also a mirrored picture of the reality that millennials are squarely inside this age group, and are now able to flex their increasing purchasing power as many are advancing before beginning families in their careers. Interestingly, males make up 67% of this segment. Of those millennials who claim they primarily buy luxury goods or services, 34 percent of them are daily treaters, 23 percent spend on gifts, 22 percent of them are occasional treaters, 18 percent spend occasionally on luxury goods, and 16 percent never spend on luxury goods, according to the survey. The sense and definition of luxury has been updated for these Millennials. They need their new aspiration of luxury and the new luxury for them is traveling, new experiences, cars/automotive, household/furniture, and then handbags & clothes. Conventional luxury goods such as handbags, cosmetics and clothes shape the definition of their portfolio of luxury spending, but within the group, the more everyday items, such as household products or cars/automotive products, hardly account for their spending. As younger young people, they sleep in the world of Instagram so that they still want a special experience where they connect the brand or product with the story or experience of it. Unique or memorable experiences play a crucial role in their lives. They’re extremely clever shoppers who know when to sell them. Millennials have grown up surrounded by modern technologies and spend 25 hours a week online on average. They research items when online, Check for more information, and make buying decisions. Traditional media is out for many millennials, they don’t read print magazines, and they don’t even watch cable TV anymore. They want genuine content that really adds meaning to them, rather than being satisfied with promotional content during commercial breaks or next to a post.

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

They want to be different or personally pursued. Millennials often appear to be idealistic, which, in turn, has inspired companies to participate in additional socially conscious marketing. In fact, no more than 81% of millennials expect brands from which they buy to publicly showcase their corporate citizenship. That means that, beyond the goods, they need a positive or social message. The greater the feeling of millennials regarding their purchase, the more likely they are to become a loyal client.

Generation Z : Gen Z, aged 16-22, although much younger, still appears on the luxury market radar. Gen Z accounts for 19% of normal treaters, 33% of whom spend on donations, 25% of whom are casual treaters. Just 19% of them seldom spend & 14% of them do not spend on luxury goods or services. Gen Z are younger customers rather than millennials. In order to be more tech-savvy, they were born inside the digital world and their entire life revolves around social media & technology. Without the internet, they will never know life. Shoppers at Gen Z think less about brand loyalty and are much more impacted by social media. They’re modern hospitable concepts and they buy impulsively. They need a shopping experience that is fast and convenient. Although much of the Gen Z purchasing activity takes place online, the majority of these people still want to go to a store before making a sale. They are intrigued by the assessment of all contextual knowledge about a product and need to feel like they are making the simplest decision possible. Gen Z wants an immersive and personalized approach to the true and original story of the company. They need to be sold on life-changing experiences rather than on a commodity. They assume that there is a sort of intention and private relation to what is being bought. 72 percent of Gen Z are prepared to invest more cash on sustainable goods, in line with the GreenMatch survey. And 9 out of 10 Gen Z customers believe businesses have a duty to deal with social & environmental problems, in line with the McKinsey reports. This Conscious Generation is concerned not only with IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

the environment, but also with social morality. After reading the critical press, 12 percent of Gen Z buyers boycotted a luxury brand in the UK. Not only the UK, but the whole community of Gen Z customers are acting to reduce the negative effect of fashion on the globe. Gen Z represents the third largest population in the world. Their buying behaviour is close to that of millennials. The same philosophy as the Millennials, they say.

Older Millennials : The last group that buys the foremost luxury goods doesn’t really have an officer name. they’re too old to be millennial. This group is additionally too young to be generation X. That’s why this group will be called the older millennials. They’re between 35 and 44 years old, and they’re another major part of the audience as well. Nearly 33% of them regularly treat themselves to luxury goods. 15 percent of them choose to spend on gifts and 15 percent of them have not purchased luxury goods or life services.

Generation X: Gen X is a more mature & older category of customers between the ages of 43 and 56. Just 7 percent of Gen X adults also purchase luxury goods or services. Although 26 percent of them said they rarely do, it’s not enough to hide the benefit of this generation group. As a matter of fact, 27% of them aren’t affluent buyers. This generational community is more loyal to their brands. It’s very hard to adjust their choice for labels. This generation often favors conventional channels and traditional promotion approaches. They think the value and history of the brand is extremely important to them.

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

CHAPTER 3 Sustainability development & its aspects

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

comes from sustainability. Without sustainability there’s no transparency possible. Brands have to be sustainable first in their workings then they’ll be transparent about their operations and activities. ransparency

Why Sustainability/ Sustainability Development is an essential? Sustainable development is a potential response to the challenges of industrialisation and population growth induced by the detrimental effects of economic growth and globalization on the climate. Humanity faces many problems, such as climate change, water shortages, injustice and poverty, which can only be overcome internationally by encouraging sustainable development at all three levels. A contribution to social change, environmental equilibrium, and economic development. As part of the latest Sustainable Development Roadmap, which includes Sustainable Development Targets to protect the earth and ensure the global well-being of people, the United Nations has accepted the 2030 Agenda. They are also known as Global Goals, an appeal from the United Nations to all countries around the world to overcome the great problems facing humanity and to ensure that all people have the same opportunities without risking our planet to live a better life. These universal objectives include the active participation of individuals, organizations, governments and countries across the globe.

“Our

commitment to

sustainability is a

commitment to our reason for existence.”

Social development, climate balance, and economic growth go hand in hand, and that’s what it needs to be like. There are so many challenges, such as the decarbonisation of the energy system, the shortage of water and sanitation, the need for resilient infrastructure and the development of more

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

sustainable cities, and the fight against climate change, which is the most important issue facing the rest of the world. More than 844 million people within the world live without basic drink service, and about 3 times as many lack to basic sanitation. One in eight people still lack access to electricity. This generation is chargeable for 74% of the world’s total gas emission. This activity is that the largest contributor to heating. the increase in temperature, caused by human actions, contains a negative impact on the lives of individuals, ecosystems and also the economySea levels are increasing, oceans are warming, crops are damaged by desertification and water scarcity is exacerbating perceptions of development in the most vulnerable areas, among other interconnected consequences. The climate emergency has a serious effect on the water cycle and exacerbates the vulnerability of regions where there are deeper repercussions. The biggest obstacle for the longer term of life on this planet as we conceive it today is the shift in temperature. Since 1990, CO2 emissions have risen by about 50 percent, thereby leading to the rise in world temperatures and jeopardizing the goal of the Paris Agreement to keep warming below 2 ° C. In order to guarantee access to affordable, secure, safe and modern energy for all, the use of renewable energy must increase from 25% to 38% by 2025. Investment in renewable energy sources, energy efficiency and other low - carbon technologies will play a key role in meeting the population’s new needs and minimizing the negative impact on the environment. Sustainability growth is an approach that prioritizes the elimination of emissions of greenhouse gases to contribute to the advancement of civilization and the conservation of the planet, supported by electricity, water and infrastructure pillars.

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

How can we obtain Sustainability Development? Implement an agenda that prioritizes the elimination of greenhouse gas emissions and leads to the growth of civilization and the conservation of the earth, with the help of electricity, water and infrastructure pillars.

Carbon-neutral Economy: The mission’s theory concerns the recycling of waste, the disposal of hazardous contaminants from goods, vehicles and installations, the use of renewable energy and the use of recovered and bio-based materials. Climate neutrality is accomplished by calculating the carbon emissions and then doing whatever it takes to balance them out, or offset them. There are many ways to do this, but it usually includes contributing or reducing carbon by energy conservation to charities that plant new trees. Circular Economy: The popular approach in today’s garment and textile industry is to continue to produce goods that have to be sold in order to sustain GDP growth, which means optimizing through put. Development in a circular economy implies an improvement in the quantity and consistency of stocks of products that can be infinitely reused. The pioneer of the circular economy idea is that revolutionary ways must be pursued in which we can need more from less. The goal is to incorporate environmental factors into product design, with product life-cycle analysis being the primary design theme. The key objective of these policies is to minimize the use and environmental effect of natural resources and energy, while taking into account the maximum benefits for consumers. Renewable and limitless resources are the subject of a circular economy and non-renewable resources are avoided. Life cycle analysis is an environmental impact

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

technique that is associated with any commodity beginning from the initial selection of earth-based raw materials to the point at which all residuals are returned to the earth. This definition is known as the approach to “disposal” or “cradle-to-grave”. If all processed goods have another life and can be disposed of in the soil, causing no damage to the environment.

Sustainability Assessment: Sustainability evaluation is a method that combines natural and social processes, discusses both local and global aspects, and encompasses both short-term and long-term perspectives. It is a mechanism in which manufacturing companies can improve the green management of the entire product life cycle and aim to develop an effective, clean, low-carbon, green manufacturing system for recycling. An EMS (Environmental Management Systems) is a systemic mechanism that enables an organization to evaluate, control and mitigate environmental hazards. Strict implementation of environmental regulations will enable investors to conduct an industrial audit or implement an environmental management system (EMS) into the organization’s policy and decision-making strategies in order to be able to track waste and pollution in order to comply with environmental legislation. It is very important to carry out internal and external evaluations during the running of the project to assess its real environmental efficiency. Cleaner development can be planned through the brand’s environmental management system to help alleviate the serious and increasing problems of air and water degradation, ozone depletion, global warming, landscape destruction, solid and liquid waste, energy depletion, acidification of the natural and built environment, visual pollution, and reduced biodiversity. Cleaner production needs to be implemented into the environmental policy of the organization as a pledge by top management to allow the business to look after sustainable production processes.

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

It is ironic that the method of designing for people is focused on making more, selling more, and wasting more. Products manufactured for limited use and then irresponsibly discarded would result in additional water waste being created in landfills or in the ocean. This practice should be stopped because it will not be consistent with the biocapacity of today, and will potentially contribute to more limited lifestyles for future generations. But not only is it the responsibility of brands that they are incompatible with sustainable growth, it is the whole framework that revolves around them. Some of them are unsure of where to start and how to create renewable energy. They will not determine who to pick for short-term and longterm benefits. Many of the brands also lack who is in charge of the government of the environment or themselves. In order to record and analyze their actions, the CSR report has been implemented in organizations as a response to this. A aspect of sustainability evaluation is CSR.

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

What is CSR? Corporate Social Responsibility is a responsible method whereby a company takes responsibility for corporate actions: from monitoring its ecological footprint to developing ethical standards. CSR is a voluntary, effortful corporate undertaking that surpass minimum statutory requirements. It is also correlated with guidelines provided by ISO 26000 standard. In order to develop CSR policy, company needs to choose a framework with standardised guidelines by ISO 26000. According to this guidelines, the company can identify, prioritise some focus areas which it will concentrate, develop its action and improve, monitor and evaluate results through reporting. To implement the CSR policy, it must adopt an effective tool or a regulatory framework which is provided by EU 2011 renewed strategy for CSR or by ISO 26000 the international standards developed by International Organization for Standardization (ISO). To address the social responsibilities significant to one’s mission and vision the guidelines of ISO 26000 appears to be the most relevant for the company. ISO 26000 is a voluntary process to CSR where the company consolidate its overall strategy in a single document which is a guidance for the company, stakeholders and consumers. To certify its CSR, the company needs to engage in certifying process with a third-party body or integrate a focus on the environment with ISO 14001. ISO 14001 is a certification of a global benchmark dedicated to measure the impact of business activities on the environment. While ISO 26000 standard provides guidance on the seven core subjects and issues pertaining to social responsibility. The core concerns of Social Responsibility is related to Human rights, Working condition, Fair business practises, Environment issues, Stakeholders interest, Local development and community. CSR is

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

concerned to all this concerns and it includes every aspect related to this issues. It includes from recruitment process, diversity to skill development, health & security to fight against corruption, suppliers, transparency process to prevention of pollution, sustainable resource use to consumer interaction, partnership with NGO to education development and involvement of local actors. They touch all the aspect of each issues/concerns. The principles of sustainability responsibility includes Accountability, Transparency, Ethical behaviour, Respect for stakeholders interest, Respect for the rule of law, Respect for international norms of behaviour, Respect for human rights. These are the basic principles or guidelines to be fulfilled for the company to frame their CSR policy. The basic principle of sustainability is concerned with the effect of the present action upon the options available in future. Sustainability measures the rate at which the resources are consumed by a company, an organization, in relation to the rate at which the resources are regenerated. Sustainability works with an ideology to not to use any longer resources which can not regenerated. Because if the resources are utilized in the present which cannot be regenerated or available in future, this can be problematic for future generations. Accountability is another important principle which helps the company to be sustainable. The principle of accountability is concerned with businesses identifying whether their activities affect the external environment, assuming their responsibility for the consequences and efforts of their activities It measures the impacts generated both internally & externally and reporting this quantifications to all the parties affected by their activities. It means the businesses needs to recognize that they are a part of wider social network and they are required to be accountable to the society. Accountability involves the development of measures of environmental performance and reporting such performance or actions. Without being accountable to society and environment sustainability is not possible in any business. The principle of sustainability & accountability leads to Transparency. Without the company being sustainable & accountable to environment and society, transparency in any company is not possible. The principle

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

of transparency is concerned with disclosure of and access to information through reporting internally & externally. The principle of Transparency proceeds from the other two principles of Sustainability & Accountability and can equally be considered as a part of the process of the recognition of responsibility of the organisation. CSR is a voluntary corporate undertaking and engagement. It surpass statutory requirements and allows to anticipate legislation. It is creative process and provides profit-making and other opportunities to the company to grow. CSR contributes to social and societal benefits through strategies & management. It helps to improve the social issues by monitoring its impact on society and to share the same value throughout the same level in the company. CSR touches the environmental issues and contributes to environmental benefits through management and different strategies of reporting. It involves reducing environmental impacts and producing eco-designed products integrating with a circular system. An eco-designed approach for products aims at integrating environmental concerns and environmental impacts at the consumption level of the product or service along with all the steps of its life cycle. Life cycle assessment quantifies the flow of material and energy used and released at each stage of the product life cycle. It accounts from raw material extraction or production of its constituents to its disposal at the end of life going through the production, distribution and other phases. CSR helps to meet the needs and expectations of stakeholders and consumers through more ethical and responsible choices at sourcing level by modernizing and innovative technology and management while preserving the value of the company’s asset. To comply CSR in business organization the management needs to be aware of the principles of sustainable development and should perceive CSR as a factor of sustainability and performance. The organization needs to define its mission, values and social responsibility. To audit whether the company is complying all the social responsibility, the company needs to appoint a person in charge of it.

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The organization needs to deliver to its stakeholders the importance of CSR policy in the business. Environmental Management System is the core of CSR action plan, every organization implementing CSR needs to set up EMS for the business. To manage the environmental issues business needs to formulate EMS through implementing ISO 14001. The EMS can be formulated by focusing on the entire company or on its specific offices, stores, production sites. The environmental performance of companies who has been certified under ISO14001 reveals a significant reduction of their environmental impacts. Its was recorded 10-15% less water & energy consumption, 5-25% less raw material consumption, 2030% more recycled waste, which generated direct economic financial benefits for the companies of about 16% increase in sales compared to non-certified companies in the market. This is an accountable profit for any company to motivate them to continue their sustainable practises. This results, surprised the fashion companies to understand its importance and values which in turn lead them to formulate their CSR policy. To take in charge the sustainability development, 73% of companies have directorate or a person in charge of CSR. Now, CSR is not just about drafting a report on their actions and engagement but the companies now want to go further by proving their reports of actions. They want to assess the positive impacts of their actions and to quantify their overall sustainability/innovative performance. Recently CSR has been developed further to promote a global approach of performance allowing to address both positive and negative impacts of a brand on society and the environment. It is very important to report the negative impact as it shows the true picture and helps the company to work on its innovative solution. If the brand is reporting about its environmental performance of its production site it should include all the segments of its activity, assessment of the

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ability to work further, confirming the precise CSR objectives, rating the completed activities or achieved results, chemicals traced, water consumed and reduction in the volume of material used. With this overall performance, the assessment should also take into account the number of suppliers supported in good practicing standard for water, number of better wet processing facilities equipped, this bought different outlook on the assessment of Performance of the business. The company’s economic & financial performance widened or broadened their meaning of performance by covering four dimensions economic, environmental, social & societal. The company’s are more concerned with value creation performance. When the company sources new sustainable raw material, organic raw fibres is stimulated for product conception & manufacturing and also for business’s strategy for value creation. By assessing the environmental performance, it leads to positive impact of regeneration agricultural practises, replenishment of ecosystem and also the positive impact on local communities from where the brand sources its raw materials by creation of jobs, revival of skills and introducing new technology in their region. In nutshell CSR corresponds to the implementation of the principles of sustainable development at company level and to be sure to integrate sustainable development with production activity in the environment.

What is DPEF ? CSR does not include any legal responsibility of a business and it is voluntary so internationally it is still a kind of soft law where company’s are not obliged to consumer or government. To overcome through this limitation, according to the law Grenelle II, France made it a legal obligation where the company’s listed in the regulated market with more than 500 employees and a balance sheet exceeding EUR 20 million needs to

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report compulsorily. Now they have extended to companies not listed in the regulated market but with more than 500 employees needs to provide CSR data in CSR report.The company’s want to go beyond drafting report on CSR commitments and evidence but they want quantify their positive impacts and overall innovation and sustainability performance. According to this new regulation of DPEF, companies needs to question their enlarged responsibility by taking into account not only the impacts of their operations on the environment but also the impacts of the products along with their life-cycle. With the help of DPEF, companies can question and evaluate the impacts of its activities. They can develop understandings of the business risks, sourcing risks and risks related to supplies, market and operations. In the different activities of the companies materials have been always problematic issue, thus it addresses the issue by strategic solution to it. This strategic priorities and their key sustainable objectives helps to formulate a plan of action with different timeline and different measures. Key performance indicators (KPI) helps you to measure and evaluate the effectiveness of solutions, functions and processes of your business. They take into account your business strategic goals and measure performance against a specific target. With the use of several KPIs you can determine if you are likely to achieve your business objectives and results & progresses. Setting true CSR policy with a concrete and efficient plan of action, sustainability results allows at the same time to reduce negative environmental impacts and to generate positive impact by benefiting positively to the value of chain of the business. Securing one’s supply chain towards sourcing cleaner and more responsible raw materials allows luxury brands to differentiate and to gain visibility in the market. For this differentiation brands started reviewing and assessing the material base, listing index, rating, comparing between used raw material through life cycle assessment. The identify new alternative

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opportunities for more sustainable fibres or raw materials at every level increasing percentage of eco-friendly materials.

Some Facts & Figures Sustainability is so much more important in today’s world than just a buzzword or a marketing phrase; it is now a way of life. It is no longer just an application for a reusable or recyclable object, but it applies to any element of your business operations instead. It means from the very essence of the goods being used to the sourcing, refining and transportation of them. Sustainable goods account for an average of 23% of overall department store sales, according to the report (26 percent in Europe, 24 percent in the USA, 22 percent in Japan and South Korea, 19 percent in China). This share is projected to increase in the next five years to 40 percent. They related sustainable development to tangible elements such as products, manufacturing processes and working conditions for about 68 percent of the buyers interviewed, instead of intangibles such as marketing, brand reputation or philanthropy. About one quarter of the customers had to remove a product from their range for reasons related to sustainability, such as social and ethical concerns, animal well-being or because the label’s brand value wasn’t compatible with the definition of sustainability. If it comes from a sustainable or socially conscious business, about 73 percent of Millennials are willing to spend more cash on a product, while 81 percent want companies to be open and consciously speak about their effect on sustainability. More than 60 percent of its consumers want to shop sustainably and 90 percent want to buy less, but better, according to the Selfridges survey. 84% though buying maintains the social and environmental effects. 60 per cent of shoppers at Matches Apparel are seeking to live as sustainably as possible. Nearly 70% of customers are now willing to pay a premium for a commodity that is sustainable.

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Using designated corners, temporary shop-window displays or more direct visual tactics, 40 percent of department stores now support sustainability. Although 70% of them tap the brands through their storytelling to participate in sustainable development with customers, they primarily work in collaboration with the labels themselves. It is estimated that brands investing in sustainable development would rise from 20 percent in 10 years to 85 percent. The significance of retail sustainability has never been so crucial, especially when it comes to fashion and luxury brands.

According to a report [17] published by the Ellen Macarthur Foundation, the fashion industry produces 1.26 billion tons of greenhouse gas emissions per year in terms of manufacturing processes, which is more than the amount produced by international flights and shipping combined. Textile mills often contribute to nearly one-fifth of the world’s industrial water emissions, and thousands of harmful chemicals are also used during processing, some of which are carcinogenic.

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Labelled by non-governmental organizations such as the Natural Resources Defense Council and others as one of the main polluters on the planet, the textile industry’s negative effect does not end with the manufacturing process. [18] Less than one percent of the products used in the fashion industry is globally recycled and a truckload of clothing is discarded, burned or deposited in landfills every second. For example, Burberry has destroyed over £ 90 m worth of unsold clothing, accessories and perfume in the past five years to protect its brand, which is standard practice among leading fashion brands.

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CHAPTER 4 Risks, opportunities & Importance of embracing Transparency

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

Importance of Transparency in Leadership : Leadership transparency includes having the workers in mind, sharing both the positive and the poor, and accepting truthful input & reviews from team members. Transparency needs a willingness to be truthful and open with the workers, even though you agree that the outcomes can be vulnerable. Transparency in leadership is very critical as it facilitates an open dialogue and accountable conduct culture in the workplace for both workers and leaders. It’s important to express your honesty, which is true to its values, because employees can see & judge what you do. This will make staff give their allegiance and confidence to employees. With transparency becoming a fundamental value people are looking for options that will offer them openness and clarity. This sense of accountability requires four key components that create a healthy company culture: o o o o

Communication Respect Shared goals & achievements Public credibility

Corporate Social Responsibility programmes in the luxury industry are becoming increasingly common. CSR is characterized as “the way a business is socially responsible to itself, its stakeholders, and the public.” These initiatives have led to a changing cultural pattern of corporate accountability. Instead of becoming a mysterious leader, you will achieve greater understanding and support from your staff when you introduce yourself as a human being. They will be more likely to consider bad news and will be

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driven to provide positive open feedback when they feel that they have a personal link with you and your business, resulting in the company’s improvement. Employees are less likely to make false assumptions about their job or their company with simple, transparent, and regular contact. Employees are more involved and committed to the company’s mission when transparency is introduced to the organizational culture. Since they completely understand the task and feel vested in expressing their views, exhibiting their ingenuity, and generating creativity to achieve the desired aim. In a sample of 400 major businesses with approx. Due to poor contact with and from workers, 100k SHRM employees reported an average loss per business of $62.4 million per year. Sharing good news and celebrating the company’s success with workers and exchanging good thoughts about the company is very easy for the company, but it is very hard to share the poor & negative work of the company, which is also very important. [21] According to the survey, when sharing good news that affected the company, 70 percent of employers were moderately or quite open, while 65 percent adequately shared how effective the business was. 75.5 percent of workers, on the other hand, felt it was necessary to know about negative news impacting the whole business, but just 45.7 percent of employers were highly transparent about it. Similarly, almost 77 percent of workers reported needing to know about company layoffs, but that detail was shared by just 40.6 percent of employees. Poor news can be daunting for managers to share, but there are ways to present it with the degree of appreciation and gratitude that employees deserve. Leading with integrity requires a willingness to be open and frank with the staff. If the organization acknowledges the need for transparency at all levels, the firm will expect to have a positive impact on the company.

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It improves the organization’s foundation and develops positive relationships with employees. They set standards for the rest of the organization to comply with when the business leads with integrity. While every company needs to be honest with its employees, it is necessary.

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Importance of Transparency in Consumer/ Society “If you don’t have trust, you don’t win the customer over time.”

onsumer’s trust in brands have been gradually eroding. According to the survey conducted by Mckinsey, the trust in businesses have fell down to 40% of countries in 2017, with more than two in five consumers saying they didn’t know which brand they should trust. [22] 52% of millennials , 45% of Gen Z and 41% of baby boomers agreed that they always research for the background information before buying the product. Consumers are increasingly demanding the information about product produced by luxury brands. They want to know whether their product is original and wants to know the product they purchase reflects their sense of style, self-image and values. The fashion industry is suffering from increasing confidence issues, and online fashion companies and other businesses are wondering and challenging if they should share information with their retailers and customers, according to the high-profile data number. This has led brands to share details about their selection, where and how the products are made, crafted and the quality of the product. For all brands, accountability has become an integral topic, with consumers increasingly worried about their supply chain, fair labor, renewable resources and the environment. Consumers have become conscious of environmental concerns and are willing to pay extra for a good environmental cause. Around 66% of customers are willing to pay more for products that are sustainable. 42% of millennials and 37% of Gen Z want to hear about the materials used in the product and how their goods are produced before buying the product. The customers have a forum to get all the product details, product reviews and also they can compare the prices because of the increasing presence on social media,

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so you can not historically monitor the customer. This has led different brands to take an active stand on social issues, to meet consumer expectations for ultra-transparency and sustainability, to look over the value chain and to conquer and keep up with the changing new generations of consumers through their own old workings and identity. Companies should not maintain their old activities in their business in order to recover the confidence of customers. Several brands have already switched to radical transparency in production, defining the cost of goods, labor, shipping, duties and labelling in response to this evolution. A San Francisco clothing brand is radically frank regarding their manufacturing, factories, artisans, costing, markup, and sourcing. Everlane provides its clients with insight into all these prices, along with material-related statistics and information about the plant where the goods were made.

“Trust and consumer confidence can have a direct and profound effect on a company’s profits ” The credibility of an organization is important for its survival as the world has become more conscious, interconnected, interdependent and transparent than ever before. In the past, businesses used to create trust through press releases and word of mouth, but now customers can literally google the truth and discover all about vision & operation for brands. So trust in this lightning fast world is the key distinguishing point between brands. The ability to trust the company and their behaviour is key point to stand out of the crowd and get noticed by the consumer. Openness, honesty and integrity are key driving forces behind consumer’s decision to buy. According to the survey conducted online by Fashion Revolution, 80% of the consumers think that fashion brands should publish about their factories where the product was produces, 67% of people would like the brands to tell them about the where the materials came from used in their product. As more

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and more people now understands that their actions can generate massive change and have massive consequences it lead every brand to work on the development and implementation of legal framework that effectively regulate their business practices. As the Millennials and Gen Z consumers make 30% of all the luxury shoppers and it would rise to 45% by 2025, Luxury brands need to accelerate their work towards sustainability to stay relevant. Trust is not just about how a company is perceived by consumers but also how the company is viewed from inside by their employees. This is an evolution of thinking which is highly accepted by Millennials.

Possible Risks faced by Luxury brands to be radically transparent of their product.

uxury brands were found to be very secretive about their corporate and supply chain practices mainly to maintain brand exclusivity. Fashion revolution publishes index where the company ranks more than 100 brands in terms of transparency, for this index they take into account two key areas corporate transparency and supply chain transparency. Corporate transparency includes policies & governance and supply chain transparency includes traceability, audits and negative impact reporting. Traceability refers to the visibility of suppliers and production network. They rank the brands in the five sub areas, policies 50 points, governance 12 points, traceability 85points, audits 75 points and negative impact reporting 28 points for a total of 250 points. According to this index, there big luxury brands Dior, Heilan Home, and S. Oliver scored zero for not disclosing any corporate or supply chain information. [24] [25] Whereas 25 brands including Forever 21, Express, Ralph Lauren, Michael Kors, and Giorgio Armani scored between 3-9% in corporate transparency. 48 brands including Timberland, Topshop, Calvin Klein, Coach, Guess, Hermes,

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

Louis Vuitton, and Burberry were rated between 11-30% transparent. Victoria Secret was rated 11% but they did not disclose corporate address or the executives of the brand. But this brands did not publish their supply chain network and the names of the organization that run their supply chain audits. But the mass fast fashion brands like Zara, H&M, Nike, ASOS, Levi’s were rated between 32-37% transparent and they have disclosed information about their suppliers. They also published a commitment to achieve living wages across the value chain. The brands performs differently on the two types of transparency. Brands communicates corporate transparency higher than compared to supply chain transparency. Brands tend to disclose information on policies and corporate governance as opposed to information on supply chain. The performance of brands on supply chain transparency showed less variation, as the majority of brands scored relatively low. The difference between the two type of transparency was about 30% on an average, they scored 30% higher on corporate transparency. This vast difference is because fashion brands and retailers do not own their manufacturing facilities so they work with hundreds or even thousands of factories and that is just the suppliers that cut, sew and assemble the garments. There are many other process down this chain i.e. weave, dye and finish materials and fibres. This adds into the supplier chain of the brand, this sometimes used by the brands as an excuse to evade the esponsibility for how their products are made. As a result big number of luxury brands still don’t disclose any information regarding their production process. From 100 brands explored, 45 brands were acknowledged sourcing from Bangladesh. Factory collapse and factory fires are not uncommon in Bangladesh. In 2005, the spectrum garment factory collapsed after adding radditional floors to the factory, 65 people were killed and 80 were injured.

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In 2010 Eurotex experienced a boiler explosion which caused a fire during this time the factory was produced clothes for the brands like Tommy Hilfiger, Zara, Gap, and Group Dynamite Boutique Inc. In 2012, fir broke at Tazreen Fashion Factory who supplied clothing for Wal-Mart and Disney. In 2013, Rana plaza disaster took all the attention from the consumers all across the world. Following the collapse of Rana Plaza, media discourse centered around laying blame on the retailers using the suppliers located in the factory and focussed on the conscience of western consumers buying and wearing garments from those retailers. This led to mass fast fashion brands being transparent about their suppliers as they have been attracted to a lot of negative attention in the past. Yet some of the brands have intentionally chosen not to disclose their supply chain or any internal information of the brand. Transparency is crucial in developing accountability, luxury brands do not want to risk their brand reputation or trust of the consumers. The covid-19 pandemic has also caused disruption on supply chain and management, and this type of disasters exposes the supply chain risks and the brands can face immediate impacts. Italy has the largest cluster of covid-19 after china and it has affected the suppliers of textiles and leather goods. Disclosure of supply chain and information related to factories and production can be affected adversely when there is disasters like covid-19 or farmer’s protest in India or Rana plaza collapse in Bangladesh. But the transparency of this information can also help the brands to overcome through this disasters and can take considerable steps to control its outcome.

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Scope & opportunities for luxury brands in embracing transparency.

ransparency in Luxury industry is rapidly growing and consumer demand for brand transparency is growing. [26] A consumer survey was conducted by Ipsos MORI commissioned by The changing markets foundation in adults aged between 16-75 years in seven different countries i.e. UK, USA, France, Germany, Italy, Poland and Spain. Facts & Data: [26] 79% consumers think it is important that clothing brands should provide information on their environmental commitments and 70% feels the name and locations of factories used in the clothing supply chain should be disclosed. 56% are ready to stop buying from a brand that was associated with pollution in its manufacturing processes. 17% are aware about the impacts of clothing manufacturing on the environment and societies. 46% are concerned about the impact of manufacturing on the environment while making purchase. 15% looked for information about how sustainable the clothing brands they buy from are. Almost 78% of consumers feel working conditions should be disclosed to the public. And around 67% finds it difficult to know which clothing brands or companies meet the higher ethical standards. This survey shows clearly that the consumers consistently demand greater transparency and brand trust. Transparency is a pressing issue in the fashion industry today and it has lead to greater opportunities for brands in embracing transparency. [27] As a solution to this, blockchain technology has been introduced in the fashion industry and it has been increasingly used for greater transparency. It is not only used to increase intellectual

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property protection for designers and companies but is also used to rapidly trace the entire journey of the finished product as it travels through the distribution chain from raw materials until it reaches the consumers. This leads to rise in greater clarity about its origins for both the brands and consumers. Luxury brands are coming up with innovative approach to transparency to don’t miss any opportunity. [28] London based designer Martine Jarlgaard collaborated with a blockchain software company named Provenance to produce world’s first tracked garment using blockchain technology. Through the blockchain technology consumers can scan the label on the clothing items and could witness the history of the product and look into the sustainability of the raw material sources. After the success of the blockchain technology in fashion industry LVMH also embraced this technology to track the luxury goods and prove their authenticity and traceability. [29] Louis Vuitton and Christian Dior ( perfumery segment ) readily participated and accepted the LVMH’s blockchain platform which is named “Aura”. This platform will make it possible for the brand to prove its origin and track their life cycle. Brands will be able to choose the information that they want to feature through Aura, allowing labels to highlight the origin of their raw materials. The brand can choose the area where they want to focus like loyalty programmes or tailored services. Because of the mass productions counterfeiting of goods is rising so traceability is a crucial subject for luxury brands. Transparency through blockchain technology has turned out to be really useful and important for brands, as it helps to know and prove they are buying an authentic product while the brands can track their sales and distribution channels in an unparalleled level of details which is beneficiary for the brands to know which products are selling well and where. It can help the brand to anticipate future demand for their products and identify the brand’s potential oversupply or issue at an early stage. It can help the brands to understand their consumers well and tailor their communications to enhance

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consumers engagement and do marketing more efficiently. For the scanning QR code is assigned to each garment and this code contains the complete history of a garment. So through this technology each wool yarn could potentially be associated with the name of the alpaca sheep where it originated from. On the same blockchain technology Fashion Coin is designed to allow the customers to get directly in touch with any member involved in the garment creation process and can be a part of the journey and can invest in the early stages of product designing. Through this level of transparency via this technology consumers can feel confident and trust can be build by providing all the information about the authenticity of the product. The impact of blockchain on fashion industry is huge and it has supported the brands in embracing transparency.

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CHAPTER 5 Overview & Conclusion

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Survey Overview :

conducted the survey in order to identify their luxury shopping journey and to know how they feel about the need of transparency from luxury brands. The purpose of this study is to understand the views of users on sustainability. The goal is to understand the behaviour of the users and know, how sustainability affects their purchasing activity. The questions asked in this survey are as follows. 1.

Age/ Gender

How often they shop luxury Products?

Are they an ethical buyer?

Has the sustainability dimension affected their shopping decision?

How likely it affects their buying decision? Rate from 1 to 5

Have they ever been curious about the production, material, supply chain and artisans behind their product?

Are they worried about the increasing carbon footprint affecting the environment?

Would they like to know the carbon footprint of the product you purchased?

Would they like to know where was their product made?

10.

Would they like to trace their product and get all the information about the product they purchase?

11.

Have they ever thought about the inspiration or concept behind the product?

12.

Would they like to know about the artisans behind their product?

13.

What they would like to know when they shop?

14.

Do they expect the luxury brands to provide them with all of this information ?

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This survey was conducted in France, United Kingdom, United States, New Zealand, India, and Canada. The survey was answered by 58 luxury consumers from this countries. Majority of them were Millennials leading with 58.6% , 32.7% were Gen Z, 6.9% were older Millennials and 1.7% were Gen X. Out of which 51.7% were female and 48.3% were male. According to the survey 41.4% of the users shop once in 3 months , 41.4% shop less than 4times in a year, 6.9% shop once in a week and 10.3% shop once in a month. Of them, 41.4% says that they are an ethical buyer, 19% confirms they are not an ethical buyer and 39.7% are not sure whether they are completely an ethical buyer. Further, 63.8% consumers agrees that the dimensions of sustainability has affected their shopping decision while 36.2% do not care about whether the product is sustainable or not. When I asked to rate from 1 to 5 how likely it affects their shopping decision, 70.7% rated above 3 while only 29.3% rated below 3. When I asked about whether they are curious about what is behind their product i.e. production, material, supply chain, artisans etc. 51.7% replied positively, 32.8% are not so keen to know behind the product and only 15.5% users do not want to know what is behind their product. 77.6% of them are worried about the increasing carbon footprint affecting the environment and 22.4% are not concerned about it. Out of them 81% would like to know about the carbon footprint of the product they purchased and 19% are not concerned about it. When they were asked if they would like to know about where their products were produced surprisingly 94.8% would like to know about it and only 5.2% would not like to know. Which means even if the consumer is ethical buyer or not they are curious about the production activities conducted by the brands and they want to know about where they were produced. 82.8% of consumers would to trace their product and get all the information about the product they purchase and 75.9% would like to know about the concept and inspiration behind the product.

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86.2% would like to know about the artisans who made their products. When the consumers were asked what they would like to know from the brands before they shop, 81% would like to know where their product was produced, 65.5% wants to know about the inspiration and concept behind the product, 58.6% would like to know the carbon footprint of their product, 53.4% would like to know the artisans who made their products and 32.8% are interested to know the supply chain. When they were asked about their expectations from the luxury brands, 91.4% would like the brands to be transparent and disclose all of this information.

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onclusion:

As we examined in my capstone the worldwide luxury market is growing twice as fast as global GDP of 278 billion euros. The perception of luxury takes on different forms and depends on the context and other people targeted. There are 4 key dimension of luxury value model i.e. Financial, Functional, Individual and Social to differentiate the consumers. For the Millennials the meaning and definition of luxury has been changed. They have come up with the New luxury norms which is environment friendly, sustainable and ethical. There is rise in challenges such as climate change, water scarcity, inequality and hunger which can only be resolved through sustainable development at social, environmental and economic level. Without sustainability there can not be any transparency in the company. Brands need to adopt sustainability in their working and find innovative approach for sustainability development. Carbon neutrality is one of them which is achieved by calculating your carbon emissions and to balance them out by doing something good for the environment. In a circular economy, the products are produced which can be used infinitely. Through life cycle analysis the brand can find out the environmental impacts of a product from the initial stage till the product is returned to earth. All this sustainability assessment tool are very beneficiary for the companies and consumers to have positive impact on the society.

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

The purpose of sustainability assessment is to strengthen the green management of the whole life cycle of the product and strive to build an efficient manufacturing system. CSR is a part of sustainability assessment, it is a voluntary undertaking that surpass minimum statutory requirements. It is correlated with guidelines provided by ISO 26000. The principles of sustainability includes Accountability and Transparency both. CSR does not include any legal responsibility of a business and it is voluntary so internationally it is still a kind of soft law where company’s are not obliged to consumer or government. To overcome through this limitation, according to the law Grenelle II, France made it a legal obligation where the company’s listed in the regulated market with more than 500 employees and a balance sheet exceeding EUR 20 million needs to report compulsorily. According to the research and survey, in today’s world sustainability is very essential and now it has become a way of life. About 73% of Millennials are willing to spend more money on a product if it comes from a sustainable or socially conscious company while 81% expect brands to be transparent and actively talk about their sustainability impact. With transparency becoming a fundamental value people are looking for options that will offer them openness and clarity. Consumer’s trust in brands have been gradually decreasing and it fell to 40% so the company should consider this change and understand the need of transparency at every level. According to the research 66% of consumers are willing to pay more for sustainable goods and to get the transparency from the brands. Openness, honesty and integrity are key driving forces for the consumer’s journey to purchase. As Millennials and Gen Z make 30% of all the luxury shoppers which is expected to rise to 45% by 2025, luxury brands need to accelerate their work towards sustainability to stay relevant in the market. Transparency has always been the pressing issue in the fashion industry but with innovative approach towards it, will lead to grater opportunities for the luxury brands.

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

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IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

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https://www.sciencedirect.com/topics/engineering/achieving-sustainable-development https://www.acciona.com/our-purpose/sustainability/climate-emergency/ https://uk.fashionnetwork.com/news/Lvmh-launches-aura-blockchain-platform-with-microsoft-and-consensys,1100403.html https://fashionunited.uk/news/business/why-lvmh-s-blockchain-isposed-to-revolutionise-the-fashion-industry/2019060743543 https://www.retaildive.com/news/lvmh-creates-blockchain-platform-totrack-luxury-goods/555050/

IMPORTANCE OF EMBRACING TRANSPARENCY IN LUXURY INDUSTRY | SUSTAINABILITY

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