Luxury sector must tackle climate risk to supply chains

Paul Snell is managing editor at Supply Management
posted by Paul Snell
in Risk
16 November 2015

Companies in the luxury sector must map their supply chains to guard against the risks posed by climate change.

A report published by Kering – the parent company behind luxury brands such as Gucci, Balenciaga and Stella McCartney – and BSR said firms in the sector must invest in making the raw materials they rely on more resilient to potential disruption.

It advised a three-step approach involving identifying priority raw materials and mapping them, taking action and setting targets with suppliers and stakeholders, and monitoring the impact of these.

Suggestions included early warning systems that alert suppliers to extreme weather, providing financial support to make production more resilient, and reducing waste in the supply chain.

The report also urged brands to pay attention to the impact of product design, manufacturing, logistics and procurement on greenhouse gas emissions, and reduce these by implementing more energy efficient processes or better placement of facilities. It also urged brands to use their status as influencers to drive action on climate change.

Marie Claire Daveu, chief sustainability officer and head of institutional affairs at Kering, said: “Given the luxury sector’s reliance on high quality raw materials, we must understand the potential vulnerabilities that climate change will pose to them and be proactive in building resilience across our supply chains.

“Implementing an ambitious climate strategy at a company level is non-negotiable. By doing so, businesses will have opportunities to reduce risk and deliver against their business goals, while at the same time making significant contributions to the environment and society more broadly.”

Kering and BSR looked at six raw materials essential to the luxury goods industry – cotton, silk, beef leather, sheep and lamb leather, cashmere, and vicuña wool.

Vicuña wool, considered the most expensive animal fibre in the world, comes from the vicuña a member of the camel family. The animals only live in South America in a region between 3,500 to 5,200 metres above sea level. This territory was identified as a climate change hot spot, and a 2010 drought in Bolivia saw watering holes dry up or reach dangerously low levels. “It appears that maintaining a supply of high quality vicuña fibres will require coordinated and focused effort,” the study warned.

Firms were also encouraged to be aware of the social impact climate change may have. For instance, cotton, cashmere and vicuña supply chains rely on poor, small-scale farmers who could also be affected.

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