Fashion designer Stella McCartney’s fur jackets, dresses, handbags and shoes are must haves in a luxury consumer’s wardrobe. Interestingly, her fur jackets don’t contain animal fur — they are made of recycled polyester and plant-based plastic. Her leather handbags are made out of coconut and mushroom leather, while the cashmere that goes into her outfits are actually 100% sustainable viscose. The British designer is setting the bar for running a successful business selling to the ultra-rich with sustainability at its core, and fashionistas are happy to pay the price — A McCartney re-engineered fur jacket is priced upwards of €1,700!.
Discerning luxury consumers, 60% of whom comprise Gen-Z and millennials, have started asking questions around how raw materials of a luxury brand is sourced, the way it is produced, whether the brand takes care of its employees, how sustainable its stores are and much more. According to industry experts, consumers are even willing to pay a 15-20% premium for a brand which is responsible and sustainably produced, and companies can no longer afford to ignore their ask. The fashion industry is the second-largest polluter in the world after the oil industry, making it all the more important for them to adopt sustainable practices. In fact, 32 fashion brands, including the likes of GUCCI, Chanel and Prada, recently signed the G7 Fashion Pact, where they pledged to become environment friendly and reduce carbon footprint.
Closer home, luxury personal care brand, Forest Essentials, has started recycling its PET bottles to convert them into saris and waistcoats worn by employees. Similarly, premium leather handbag brand, Hidesign (which also has a luxury brand, Atelier), takes pride in naturally tanning its hide as opposed to using chemicals. “If you take a by-product like leather and create a luxury product, it is the height of the art of sustainability. Over 90% of the leather used internationally is chemical tanned. We use a natural vegetable extract called myrobalan to tan our leather and that is what makes us sustainable,” says Dilip Kapur, founder, Hidesign.
Almost 70% of luxury fashion brands worldwide have stopped using fur in the last 24-36 months, according to Akash Seth, CEO of luxury marketing company, Magnanimous. “The same fur jacket which has given them the maximum profit has gone out of the window and they don’t have a choice. It is all about creating the same jacket, which looks like fur but isn’t fur. It is now available at one-tenth the price and the premium comes from the conversation about how you have impacted the livelihoods of artisans who handcrafted the jacket.”
No wonder that luxury automakers, including BMW, Mercedes or Lexus, are aggressively shaping up plans for electric vehicles. Sustainability though, is not limited to engines powered by electricity. “In a society where environmental consciousness is steadily increasing, it has become imperative for luxury brands to have a sustainable business model. Consumers are becoming more and more aware of the ecological imbalance and climate change, and are more conscious of their consumption and wastefulness,” says Naveen Soni, president, Lexus India.
The automaker, which seeks to become carbon-neutral by 2050, has been investing in making its car interiors fully sustainable. The speakers in Lexus cars for instance, are made out of bamboo-charcoal, while the luggage compartment trims are made from recycled plastic.
Thirty-year-old corporate lawyer, Ashlesha Mehta, seldom misses an opportunity to buy a luxury bag. Marquee brands such as Chanel, GUCCI and Louis Vuitton adorn her wardrobe and the globetrotter lawyer is already looking forward to her upcoming trip to Paris where she plans to indulge in bag shopping yet again. However, Mehta isn’t particular about acquiring these priced possessions (which often run into thousands of dollars) by paying top dollars at a plush high-street store or in a luxury mall. In fact, she recently bought a used Gucci handbag for ₹1.5 lakh, almost 50% lower than the retail price at luxury marketplace Luxepolis.
Resources have never been a constraint for the 30-year-old, so why would she buy a used bag? Mehta’s rationale is straightforward — “I loved the bag, but more importantly, by buying a used bag, I have contributed towards reducing carbon footprint and saving the planet.” Mehta represents the Gen-X and millennial consumers obsessed about doing good and giving back to the planet and society. For them luxury is about using brands which are sustainable and purposeful, and they have no qualms about possessing a used product, often referred to as ‘pre-loved’ or ‘pre-owned’ luxury.
For 33-year-old investment banker, Vinesh Sharma, luxury is his newly acquired 80-year-old pre-owned vintage Rolex watch for which he paid a fortune at the Rolex store in London. Sharma had to shell out four times more than what he would have had he bought a new watch. The premium he paid was for the heritage of the watch. “The watch has a deep-rooted history, it also has details about the earlier owners and their lineage, which makes it even more special,” he explains.
“It’s not a question of just sustainability, it is how many times you use a product which makes a difference,” explains Abeek Singhi, senior partner and MD, Boston Consulting Group (BCG).
Building sustainable businesses which stand the test of time has become a vital conversation across corporations world over, and the $7 billion Indian luxury industry is no exception. Though the concept of ‘reduce, recycle and reuse’ may sound contrary to the philosophy of luxury, which is all about rarity and exclusivity, manufacturers are beginning to see value in it. “Luxury gets used rarely and it is preserved better. If somebody wants to upgrade from one product to another, she can give it to someone else. For the brand, it is about generating long-term value from the product, versus producing endlessly to meet new demand,” explains Bijou Kurien, chairman, Retailers Association of India (RAI).
The past couple of years have seen the emergence of a host of pre-owned luxury marketplaces such as Fashionphile, Vestiaire Collective, Rebag, Luxury Garage Sale, Collector Square, Bob’s Watches, StockX and TheRealReal. Owners of luxury brands sell their bags or watches on these platforms, which are bought by others. These websites give the pre-owned luxury shopper details of the origin of each and every product, about the owner and also how much he/she has used the product.
Companies are also inviting customers to return their old possessions to put them back in the market for reuse. The Fossil Group, which owns brands such as Michael Kors, Armani Emporio and Armani Exchange, is in the process of rolling out its global take-back programme to reduce carbon emissions to net-zero by 2030.
“Consumers are conscious of their choices. They don’t want to contribute to over-creation. Most of the recycled and pre-loved brands are more expensive. They call it vintage and automatically the premium goes up,” explains Joono Simon, sustainability enthusiast, and CEO of Bengaluru-based creative agency Brave New World.
Building Sustainable Business Models
Does adopting sustainable practices imply compromising on luxury experiences? Certainly not, says Seth of Magnanimous. “Luxury is inaccessible because it is limited edition. It is created in a bespoke customised manner, which means it needs to be sustainable.”
“Luxury and sustainability follow the same principles of minimalism and maximising from whatever you have. Use the best of materials, but don’t waste your resources,” adds Smita Jain, director, and Master in luxury goods and services management, SP Jain Global Management.
Luxury brands across the board are working hard to build sustainability into their business model and balance profitability with the planet. Sustainability is not just limited to selling a pre-loved product or creating luxury goods out of sustainable resources, it requires a change in the way the raw material is sourced, the manufacturing process, packaging and methods, as well as ways in which the product is sold at retail stores. Sustainability also includes giving back to the society by providing jobs to local communities and improving their quality of life. “It is about building morals, ethics and ethos into your system. For us women empowerment is sustainability as we are giving them livelihood and financial independence at our factories,” says Samrath Bedi, executive director, Forest Essentials.
For Jean-Marc Pontroué, CEO, luxury watch brand Panerai, the company’s sustainability measures begin from its offices and factories and go all the way up to the materials used in production. According to Pontroué, the Panerai manufacturing facility reduces carbon dioxide emissions by implementing several recycling processes and through use of renewable resources like the reuse of rainwater and 100% hydro power. “The goal is to implement the use of recycled materials. We plan to do this in a way that its adoption doesn’t affect prices since it will be based on economies of scale,” explains Pontroué.
For luxury alcoholic beverages company, Moët Hennessy, business is about profitability, people and planet. “Moët Hennessy is committed to making the future sustainable for the planet and people,” says Ipsita Das, MD, Moët Hennessy India. The alcobev major invested €20 million last year to create a research centre devoted to sustainability. “We use 100% recycled water in our vineyards, practice drip irrigation in all Chandon vineyards and have zero herbicide usage,” she adds.
Embracing sustainability practices has become imperative for luxury brands, but it comes at a cost, which at times can be as high as 50-60% in certain categories. But the cost increase, say industry experts, is one time and brings down operational expenditure in the long run. Recycling a pre-loved product may not be that inexpensive, but that would also mean not producing as many new products. “Sustainability is an investment for increasing revenues, strengthening the image, and gaining market share,” says Alessandro Giuliani, MD, SDA Bocconi Asia Center.
Eleonore Cavalli, art director and co-founder of luxury home décor brand, Visionnaire, agrees. “It costs, but is also a cultural transformation necessary to move forward, it’s an investment.”
The front-runner in adapting sustainable practices in the luxury sector is the hospitality industry. From reducing carbon footprint by embracing renewable power to cutting down on plastic usage as well as impacting livelihood of local communities, hospitality chains are aggressively embracing sustainability, especially post Covid-19. “The pandemic has made the hotel industry more conscious about sustainability and how we are taking care of our planet,” says Gaurav Pokhariyal, executive vice president, human resources, Indian Hotels Company Ltd (IHCL).
The hotel industry is among the largest generators of carbon footprint. While it had already started taking baby steps by gradually phasing out the use of plastic and requesting guests not to put their towels and bed linens for wash unless it was really required in order to conserve water as well as costs, the pandemic accelerated their urge to adopt sustainable practices.
Consumers are demanding sustainability, too. According to a recent survey by Booking.com, 88% of travellers said they want to travel more sustainably than they ever did. While 94% of Indian travellers confirmed that sustainable travel is important to them, 68% cited the recent news about climate change as the reason for making more sustainable travel choices. The travel booking website has started giving accreditation to properties for sustainable practices on parameters such as waste management, water and energy conservation as well as adhering to climate norms. “Around 100,000 properties have received the accreditation,” says Laura Houldsworth, MD and vice president, Asia-Pacific, Booking.com.
This explains why hospitality companies are embracing sustainable practices in a hurry. IHCL (Taj Hotels) recently launched its sustainability initiative ‘Paathya’, as part of which it has defined several short and long-term goals to be fulfilled by 2030. The company has also tied up with IFC, and is inviting renewable energy start-ups to come up with energy conservation solutions. “We have a pilot running in 3-5 hotels,” says Pokhariyal.
However, sustainability in hospitality is not just about installing solar electricity panels or replacing plastic with glass bottles. It is also about sourcing locally, using local building materials as well as giving livelihood to local communities. And, while doing all of that, one has to also ensure that the luxury experience is not compromised. It is all about how you substitute Italian marble with local stone or smoked salmon with pomfret from the Arabian Sea. “You need to source locally, reduce manufacturing costs and focus on a high lifecycle,” says Kapil Chopra, founder, The Postcard Hotel, and former president, Oberoi Hotels.
At his property in Goa, Chopra has replaced Italian marble with Kadappa stone, while in Mangalore he has used the local Sadar Ali granite. “Your cost of construction goes down. Kadappa costs ₹30 per sq.ft. while Italian marble costs ₹450.”
Sourcing locally and using locally sourced materials are at the heart of sustainability, agrees Udit Kumar, co-founder, Brij Hotels, a new-age sustainable luxury chain of hotels. Brij, says Kumar, has a concept called ‘zero kilometre’, as part of which it sources everything right from food ingredients, upholstery as well as building material from the district where its hotel is situated.
“We choose to avoid the word luxury around anything we do at Six Senses. We have always thought less is more. When looked at from a high level, sustainability is about what one is creating and how it integrates with wellness, as well as how one is engaging with the community around,” explains Siddartha Chakravarty, sustainability director, Six Senses Fort Barwara.
But sustainability in luxury hotels comes at a cost. Switching to glass instead of plastic, or other alternatives such as bamboo (replacement for plastic toothbrushes and combs) cost 30% higher. However, Shruti Shibulal, founder, Tamara Leisure, who has built her business on the principles of sustainability from the time she launched in 2012, doesn’t agree that sustainability is expensive. “If you decide to become more sustainable there are so many opportunities for cost saving. One way to conserve costs is by optimising your menu. An elaborate menu increases waste.”
A luxury apartment by the Lodha Group could cost anywhere between ₹15 crore and ₹35 crore. It is obvious that a consumer investing in such properties would be conscious about sustainability. Hence, sustainability is no longer a choice, says Abhishek Lodha, MD and CEO, Macrotech Developers (Lodha Group). “Consumers today are more evolved, and have a better appreciation of the importance of long-term sustainability. They realise they need to leave the place fit for future generations. Also, companies can’t pursue profit without regard to the overall impact of what that pursuit of profit ends up doing.” The group is committed to being net-zero by 2035. Apart from putting in practices such as recycling of waste and water, the developer has been designing its buildings in such a way that there is adequate shading so that the utilisation of air-conditioners is reduced. It also sources materials from a 400 km radius to reduce transportation requirements and fossil fuel usage.
For Niranjan Hiranandani, chairman and MD, Hiranandani Group, luxury is all about offering rock solid construction quality. Also, though a sustainably built luxury real estate project could jack up prices by 20%, the costs get covered over a period of time. “If you are not sustainable, you may not be in the consideration set of consumers. Earlier consumers were not willing to pay for sustainability, but now they are asking for it.”
Apart from developers investing in waste water recycling and rainwater harvesting, premium bathroom fitting companies such as Hansgrohe have also launched environment-friendly versions of their products. Hansgrohe’s EcoSmart range promises to reduce water usage by 30%. “Since we deal with water experiences, for us what matters most is preservation of resources, that is water. We have a spray technology, which not just reduces usage of water, but the same water when it falls on your body is a softer droplet,” says Gaurav Malhotra, MD, Hansgrohe India.
That luxury brands need to adopt sustainability in order to stand the test of time is clear. But are buyers willing to pay a premium for it? BCG’s Singhi says buyers are more willing to pay a premium for sustainability if they are buying assets such as gold, real estate or cars, but when it comes to consumption categories such as a watch or a shoe, they aren’t yet willing to pay the extra rupee.
For now, companies are not charging much of a premium. But it’s just a matter of time before sustainable luxury brands have a super-premium price tag.