Luxury Goods - Sustainability Sector Profile

Philippe Cornet

Research Organisation
Kepler Cheuvreux

Report Date
March 1, 2012

Document summary

The Luxury Goods sector's endorsement of Sustainability is mainly triggered by reputational risk mitigation. In today's context of meteoric cons-cyclical growth prospects (10% CAGR scenario up to 2020) the need to meet such a demand can lead to risk-taking, overheating, saturation... and unexpected financial consequences. The challenge of sustaining control of reputational risk for 130 major brands while meeting this demand is the reason why this report considers raw materials, brand stretching, increased subcontracting, purchasing and producing in Asia as key ESG issues. Overall, the industry has little involvement in sustainable products, is observed by NGOs, and is criticised for its marketing. Brands remain afraid that empowering consumers on sustainable values could reverse the dream and taint the emotional value. This report highlights a number of weak signals as well as some seeds of change. On regulation risk, some potential concerns, such as the "made-in" issue, are identified.

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