Can luxury ever be ethical?
By Carlos Ferreira
How can companies in the luxury segment be responsible? For a long time it has been assumed that companies producing luxury articles are immune to concerns about wider societal concerns and business responsibility in general. Images of exclusivity and conspicuousness of consumption are associated to this idea; social and environmental concerns, this view goes, are alien to luxury. For example, experiments in the garments industry have suggested that to explicitly include recycled material in luxury clothes reduces their value, rather than adds to it.
There are reasons to believe this is not always the case. Companies in the luxury segment are just as exposed to potential PR blunders as other producers of goods and services. In the modern, networked, post- NO LOGO world, no company, no matter how rarefied and wealthy their clientele can easily shrug off accusations of malpractice, wilful ignorance or flat-out malfeasance. What’s more, sometimes luxury companies can actually be more vulnerable to bad press than their mass consumer counterparts, as they depend on projecting a cast-iron, non-ambiguous image. At the same time, they often depend on long, complex supply chains, which they do not fully control or audit. And while suffering from these limitations, luxury companies often come to realise that their customers, while not openly demanding responsible and ethical practices, have implicit expectations about what the company does and how it does it. One interesting example of this is the jewellery industry, as recently described in a report from the Centre for Business in Society, at Coventry University. The report, Titled Signalling Change: Jewellery SMEs and Corporate Social Responsibility, is aimed at the jewellery industry, CSR practitioners and policy-makers.
Small companies, problems down the chain
Over the years, the jewellery industry has suffered its fair share of problematic (and traumatic) PR difficulties, which have raised important questions about their practices and commitment to social and environmental best practice: environmental devastation caused by open pit mining, long-term pollution effects of the extraction of minerals, their role in financing conflict and human rights abuse and labour disputes. The result is that the jewellery industry ended up being associated with making the expression Blood Diamonds part of the everyday lexicon of campaigners for better business practices. A dubious distinction if ever there was one. But speak to the industry and the case becomes more complex. The UK jewellery industry is not dominated by large companies; instead, what the report shows is that most of the companies selling jewellery are Small and Medium Enterprises (SMEs), facing increased pressure to engage in Corporate Social Responsibility (CSR) activities. These SMEs see themselves as only small pieces of a large industry, with very little capacity to make a substantial difference. They also feel that, as small players, they face disproportionate compliance costs.
A darker side of trust
Much of the work necessary for jewellery SMEs to comply with responsibility standards involves improved traceability of the provenance of materials. This is a tall order for small companies, which have neither the capital nor the information to provide full traceability of the products they sell. The sheer length of jewellery supply chains present obstacles to the adoption of CSR by small and medium enterprises. As a result, they are often in a position of working based on trust in their business partners. The very small number of employees in a typical jewellery SME means that business relationships become personal over time; the result is strong bonds of trust between individuals in the same supply chain. But while trust is usually a good think in social a business relations, in this case it can prove a negative factor in implementing supply chain traceability and CSR, as individuals’ mechanism for assuring the provenance of products is to ask their supplier and take the answer as trustworthy, without hard evidence. Trust can be an obstacle to CSR adoption in jewellery SMEs.
Not broken, in need of fixing
Luxury providers faces the need to future-proof their practices, a task which requires adopting CSR across long and complex supply chains. Each new PR blunder creates yet another wave of questions, and at the very least hurts reputations for all companies in the long term, not to mention having the potential to result in a patchwork of regulation, making industry operations more difficult by increasing compliance costs. What’s more, it is at the level of SMEs that non-compliance to business responsibility could prove to be the “soft underbelly” of the CSR armour that luxury industries are building. Specific actions must include increased transparency along supply chains, with the implementation of traceability mechanisms and best practice, as well as more effort to communicate the added value of their recent CSR initiatives. Furthermore, the entrenched trust between buyers and sellers must be complemented by public disclosure of facts and figures which can assure other stakeholders. While consumers may not be actively requiring that responsible business practices be at the heart of all the luxury products they purchase right now, these industries cannot afford to become complacent; being responsible may be the key to survival when the next corporate scandal happens.
Dr Carlos Ferreira, Centre for Business in Society (CBiS), Coventry University