I. Introduction
Climate change and global warming are one of the biggest challenges of the current generation. Industrialization has brought overall wealth and better living, however, its negative impact on the environment is evident. Every industry has contributed to the climate change and global warming. Even the apparel industry cannot avoid the criticism regarding fast fashion and its contribution to the pollution. The industry has been accused of its carbon footprint becoming the second highest polluting industry, second only to the oil industry, due to fast fashion systems (AlterNet, 2015). According to the Global Climate Action Summit (2018), fashion in general contributes up to 10 percent of total greenhouse gas emissions.
The transition to the decarbonized economy is in progress. Every industry and all aspects of business functions are influenced by climate change. Sustainable development and climate change are closely linked, and business plays the key role in addressing and finding solutions to the challenges of climate change. Even luxury business cannot avoid environmental issues. The relation between luxury and sustainability is explored with the Burberry case based on the Triple Bottom Line (TBL) framework (Elkington, 1998). Burberry received backlash for burning $38 million of unsold goods in 2018. Centering on Burberry’s case, this paper aims to discuss the current sustainable practices of luxury business along with its future direction toward sustainable development.
Ⅱ. Organizing Framework
Sustainability is a major goal for many businesses. It involves “the corporate, government, and consumer responsibility to integrate economic, social, environmental, and cultural dimensions to promote cooperation and solidarity among people and generations” (Kunz, Karpova, & Garner, 2016, p. 92). The three spheres of sustainability consist of economic, environmental, and social. However, measuring the degree of a company’s sustainability and its efforts for sustainable growth is not easy. John Elkington (1998), a pundit in corporate responsibility and sustainable development, initiated to measure sustainability and created the TBL framework.
The TBL is an accounting framework that integrates three principles of organizational performance: economic, environment, and social. These dimensions are also called the three Ps: people, planet and profits (Slaper & Hall, 2011). Although scholars and business practitioners generally support the role of the TBL in capturing the essence of sustainability by measuring the impact of organizational performance on the 3Ps, measuring all the dimensions of the framework is more challenging than defining it. Slaper and Hall (2011) discuss the TBL framework and the variables of each dimension. Economic performance measures numerous variables that involve the bottom line and the flow of cash such as revenue, expenditures, and business climate and diversity factors to name a few. Environmental measures include, but are not limited to, energy consumption and waste management. Social variables encompass social dimensions of a community and measure the impact that a firm has on the communities where it operates (Hubbard, 2009). Despite its complexity in measurement, the TBL framework allows companies to consider other aspects of organizational performance beyond economic indicators in running a business. Although it is worth discussing various aspects of sustainability, this paper focuses on the environmental dimension of the TBL with consideration of the current environmental crisis and the pursuit for a lowcarbon economy.
Ⅲ. Luxury and Sustainability
Luxury and sustainability may be counterintuitive in the sense that the former reflects excess, hedonism, superficiality, and ostentation while the latter elicits altruism, sobriety, restraints, and morality (Carrier & Luetchford, 2012). However, one might believe that sustainability is built into the definition of luxury. There are various qualities of luxury. Quality, rarity, heritage, and durability are the key features of luxury, and these qualities blur the gap between luxury and sustainability (Amatulli, Costabile, De Angelis, & Guido, 2017).
Luxury is an industry that is not traditionally linked to climate change and environmental concerns. It is more associated with indulgence and lavishness with the notion of disregard and selfishness (Chua & Zou, 2009). However, the features of luxury evoke a different meaning in its concept. The timeless and hand-made quality aspects of luxury goods make luxury intrinsically sustainable. High-end luxury goods are made with craftmanship with substantial attention to detail and workmanship. The materials are top quality and durable, and the designs are unique and exclusive. Many consumers turn their wardrobe into an investment portfolio of rare and timeless fashion pieces. As an example, used goods manufactured by Hermès or Chanel have excellent resale value and are considered long-term assets rather than perishable assets.
Despite its inherent sustainability built into the luxury concept, luxury brands are also forced to facilitate sustainable development and growth. According to Winston (2016), there are primary pressures for high-end companies to perform sustainable practices such as cutting greenhouse gases. First, the laws are changing and tackling up the supply chain. Second, high-profile trendsetters are affecting social norms. Also, younger consumers are more sustainable than other older generations. Third, investors value brands that are good at managing environmental and social issues. Finally, business environmental factors such as biophysical limits compromise a company’s ability to source materials and produce goods. These direct and indirect pressures are affecting luxury brands to pursue sustainability more than ever before.
Ⅳ. Burberry and Sustainable Development
Burberry is a multinational brand operating in three regions: Asia Pacific (41% of retail/whole revenue), Europe, Middle East, India, and Africa (EMEIA: 36%) and Americas (23%) (Burberry, n.d.b). See <Fig. 1> for their revenue by channel, region, and product (Burberry, 2018). The company designs, develops, produces, and sells its goods under the brand name. It owns manufacturing facilities in the UK and works with an external supplier network predominantly located in Europe. Its global marketing revolves around “Britishness” with a distinctive British appeal.
Burberry’s responsibility agenda is based on the TBL framework and clearly specifies its role in driving positive change for the industry, the communities, and the environment. See <Fig. 2> for Burberry’s responsibility goals to 2022 (Burberry, n.d.e). The company is committed to reduce environmental footprint and contribute to climate change. The highlights since 2012 are 77% of leather manufactured by certified tanneries, 33% energy savings, and 18% reduction in water use at key mills. Burberry reported its innovation at its offices, stores, warehouses and internal manufacturing sites, its efficient resource management in the process of manufacturing, and the usage of sustainable raw materials for cotton, cashmere, and leather. The company’s responsible sourcing policy ensures natural resource preservation, animal welfare, and human right protection. Together with Gucci and other key luxury brands, Burberry also announced its intention to ban animal furs in its products, a more sustainable material (Yotka, 2018).
Despite its sustainability efforts, Burberry was put on the media spotlight for wastefully burning $38 million worth of unsold goods in September 2018. Destroying items in that manner has been commonly adopted by luxury brands as an effort to maintain its brand value (Paton, 2018). Right after the reports were made public, the company reported on its website that Burberry was the leading luxury brand in the 2018 Dow Johns Sustainability Index, which is a metric assessing economic, environmental, and social factors. After the backlash from consumers and green criticism, Burberry announced that it would discontinue the process of burning items.
Younger generations are more socially and environmentally conscious, which might affect how they symbolize luxury. Consumers believe that modern luxury is about being socially and environmentally responsible (Kollewe, 2018). As Winston (2016) stated, luxury brands should not underestimate consumers’ green values and social pressure to be sustainable. Compared to any other brands, luxury brands have great room to improve and have the capacity to do so. In the next section, this paper discusses what luxury brands can do in this climate crisis and high awareness of environmental issues.
Ⅴ. Luxury and Its Turnaround Plan
Luxury brands are the trendsetters and tastemakers. They are the leaders in the fashion industry and responsible for improving on sustainability. There are various ways for luxury brands to excel in sustainability and affect other companies’ practices. The companies can incorporate the concept of sustainability in their brand stories as part of the branding process. They can also improve demand planning accuracy and produce upcycled goods.
1. Sustainability in luxury branding
Telling a story is an important part of the branding process for luxury brands. Every luxury brand has its own story. Angela Ahrendts, a former CEO of Burberry, revitalized the brand by helping find its roots and centralizing design. Many luxury brands have experiences in losing its focus by exploiting licensing opportunities for its core products to acquire short-term profits. Burberry also made the same mistake. The former CEO worked with Christopher Bailey to centralize all their design under the designer and started to manufacture trench coats and cashmere scarves in-house. It is imperative for luxury brands to tell customers how their products are made and for what they are made, and many of them have done this.
Luxury brands may not want to focus on sustainability for its branding, however, they can facilitate sustainable development with more creative approaches. Promoting and bolstering about sustainable manufacturing processes with consideration of the environmental and social aspects is a great topic for story-telling and luxury branding. By doing so, the companies can ensure the reason for their luxury value and high price points by communicating sustainability - focused narratives such as how the raw materials are collected respecting the people and the planet and how they are innovating ideas and design. Luxury as being associated with leadership and innovation can produce substantial innovation in sustainable materials and product design.
Luxury brands can practice sustainability and branding in many other creative ways. They may host design competitions in which customers create new product design using old or unwanted luxury items. Another way of green branding would be informing consumers of their various sustainable efforts. Kering, one of the biggest global luxury group, is partnering with London College of Fashion to launch a course that focuses on luxury fashion and sustainability. The purpose of the course is to educate green design and raise talents in eco-friendly practices (Lake, 2018).
2. Accuracy in demand forecasting in fashion
Profit oriented business practices and inaccurate demand forecasting pose environmental impacts. If luxury brands aim to succeed in today’s environment, accurate forecasting and sustainability must be structured within the organization. With a focus on the long term triple bottom line, the three P’s, companies can manage resource more efficiently and effectively through the supply chain, resulting in less waste and overproduction of items. Although business practitioners point out the challenges in demand forecasting accuracy considering fickle consumer tastes and preferences, it is obvious that many of the luxury brands have failed to evoke rarity and scarcity of goods. Thus, by implementing a strategic plan of sustainability and producing at minimal levels, rarity reintroduces itself onto these limited produced luxury goods. And hopefully, eliminating the waste and resources from overproduction.
Shortage and stock-outs lead to lost revenue, but excess in production increases wastes and restricts future resources. This goes same to fast fashion. It was created to promote unplanned, frequent purchases by provoking a sense of urgency. However, even fast fashion retailers have been overproducing their products leading to excess in stock and waste. Better accuracy in demand forecasting is crucial for many businesses including luxury fashion. The efforts to increase market share and profitability have affected luxury companies to produce more than less.
Amazon has been successful due to its capacity to analyze big data and technological innovation. However, many of the fashion brands heavily rely on brick-and-mortar stores, causing for insufficient data and a lack in capacity to forecast consumer demand accurately. Luxury brands are traditionally meant to drive demand instead of predicting future sales because they help to innovate design and trends and create new ideas. The reality is that brands that drive demand are very few and limited, and these brands are more likely to be smaller in its size or privately held. Innovation and investing in technology would help these traditional luxury brands to become more sustainable. And there are many technological companies that offer more accurate planning and forecasting. Improving demand forecasting powered by artificial intelligence is one of the most promising applications for product development and supply chain.
3. Upcycling
Upcycling is the process of completely changing the appearance of old or discarded materials into new, marketable goods. Utilizing this concept, luxury brands can create a line of new styles with remaining inventories and recycled products and merge them for a brand-new product. See the product images of Burberry in the <Fig. 3> as examples of upcycled style creation. Although the products shown in the images were Burberry’s new product design and not upcycled goods, they were included as examples of upcycled styles that are also aligned with the brand’s core design philosophy. Products can be made from repurposed and recycled pieces to create an upcycled line featuring details like patchwork and Burberry pattern designs.
Ⅵ. Contribution
This paper contributes to research in the luxury segment by provoking thoughts regarding the relation between luxury and sustainability. It provides useful insights about the contradictory, but at the same time compatible concepts. While most luxury brands have joined in the sustainability movement, certain practices have been criticized like Burberry’s burning practices. Based on the current events centering on sustainability, the paper generates important topics for researchers and business practitioners to discuss and consider in the face of climate change and sustainable development.
Ⅶ. Implications
1. Implications for researchers
This discussion identifies future direction of research in terms of luxury, sustainability and the future. Luxury is often associated with waste and selfishness. It is imperative to investigate the importance of sustainability in branding luxury products. Also, accurate demand forecasting is crucial for business success. However, there is lacking knowledge about how the apparel industry deals with excess in production. Researchers need to investigate business practices to understand how companies can improve accuracy in demand prediction and develop new strategies for recycling overstock. Finally, upcycling is a new concept, but whether it can be applied to luxury brands is yet to be determined. Luxury consumers would prefer newly created ideas and designs and not necessarily newly created old ideas. But with the correct marketing and advertising, consumers may embrace a concept like recycled new (ReNew). Upcycling can create innovative design ideas, but more research is required to understand consumer perception towards new process and ideas.
2. Implications for practitioners
Practitioners can consider the relation between luxury and sustainability. Upcycling is one of the most sustainable way of dealing with old unsold lines. This paper can be utilized for their consideration and idea generation regarding sustainability, sustainable product design and waste management.
