Palm Oil

 

Regarding the policy on palm oil, the environmental reports lack basic references on the consumption, sourcing, processing and manufacturing components (LVMH, 2014). Coupled with the fact that LVMH is not a member on the Roundtable on Sustainable Palm Oil (RSPO) website, it was ranked to be the worst Ethical Consumer rating in the fields of habitats and resources and climate change (Ethical Consumer, 2015).

 

In the ten-year strategy, LVMH must re-examine the current practices and comply with the regulations to independently audit raw material suppliers as palm oil derivatives are heavily utilised by the cosmetics subsidiary. By 2026, LVMH should aim to achieve 100% palm oil from RSPO certified sources, enhancing its reputation and credibility as a responsible brand.

 

 

 

 

Chemical Usage

 

As for the policy on chemical usage, there is inadequate clarity on the usage of parabens and phalates especially across the production lines such as cosmetics and perfumes (LVMH, 2014). Despite the negative consequences, both ingredients are prevalently applied in the manufacturing procedures and pose significant negative repercussions on the ecosphere and human health. Studies have demonstrated that phthalates and parabens, as solvents and preservatives for different chemicals, could potentially upset hormone secretion, disrupt the reproductive system, lead to organ damage and even possibly cause cancer with excessive exposure (EWG’s Skin Deep, 2015).

 

As a result, LVMH should be expected to be responsible in constraining the usage of these toxic chemicals with transparent regulations and clear objectives through a graduated scheme to eliminate the detrimental impacts within a defined timeframe. Aside from strictly adhering to the restrictions in quantity allowance stated by authorised code of conducts such as the Cosmetic Products (Safety) Regulations, all  potentially harmful  ingredients involved in the synthetic processes of LVMH's cosmetics should be explicitly labelled on the packages.

 

 

 

 

Leather Sourcing

 

LVMH was found to have minimal information regarding the controversial preservation process of leather upon which numerous fashion brands under LVMH rely heavily on (Ethical Consumer, 2015). An unethical but common practice in the clothing industry is to utilize a mixture of detrimental chemicals including cyanide, arsenic, sodium sulphide, trivalent chromium sulphate, sodium sulfhydrate and tannery effluent to delay or impede the decomposition process of dead animals, prolonging the industrial application of leather for more profitability (The Edinburgh Woollen Mill (Group) Ltd, 2014). However, these pollutants, including solid waste and gases, exert devastating environmental effects on the land, water and air from the process of converting animal skins into finished leather products (PETA, 2015). Besides, the toxicity of these chemicals poses serious health problems such as cancer and leukemia among residents and workers near tannery factories (PETA, 2015).

 

To alleviate the negative environmental impacts of the tannery effluent, disposal standards should be enforced with measurable targets. Specifically, LVMH could raise the budget for sustainable development to build cost-effective Effluent Treatment Plants (ETP) and to remove the pollutant by end-of-pipe methods with progressive goals within three years (Leather Panel - UNIDO, 2014). The working conditions of workers should be closely monitored and guaranteed by health insurance and preventive measures on the toxicity level in the factory. This will not only encourage productivity and commitment in the workplace, but also reduce the risks encountered by LVMH, such as accidents, allegations and lawsuits.

 

The demand for exotic leathers has also exacerbated the mistreatment and extinction problems for rare species such as alligators and crocodiles. Violations of animal rights are widely denounced by environmental activists, who accuse LVMH of unethical and inhumane handling of animals in the slaughterhouses, with allegations including electrocution and exsanguination while animals are conscious (Luxury Daily, 2016).

 

Leather from illegal cattle ranches in South America have also been a major cause of deforestation of the Amazon Rainforest, harming biodiversity. 

 

To align the profit motive with a sustainable mission in business practices, LVMH should commit to international legislation to refrain from abusing and endangering animal species, and contribute positively to biodiversity, and focus on alternatives. 

 

LVMH should also ensure sustainability along the supply chain by means of establishing long term partnerships with suppliers and auditing supplier farms, ensuring that deforestation is minimized. 

 

Furthermore, a scorecard system could be implemented to communicate and safeguard the clear expectations of LVMH to manufacturers, suppliers and distributors in order to sanction those who breach the law and grant subsidies to those with satisfactory performance.

 

 

 

 

Cotton Sourcing

 

Regarding cotton sourcing for garments, LVMH gives no explanation of labour conditions, farming practices or proportion of genetically modified (GM) cotton in the supply chain (LVMH, 2014).  According to Anti-Slavery International (ASI), Uzbekistan ranks as the fourth largest exporter for global cotton supply, with Europe being the dominant destination (Anti-Slavery International, 2015). However, problems of child labour and poor working conditions and severe infringement of human rights are prevalent in Uzbekistan, with workers suffering from malnutrition, heavy workload, extreme heat and starvation (Anti-Slavery International, 2015).

 

Thus, LVMH should demonstrate appreciable concern for social welfare and contribute to the campaign of fair trade, taking concrete steps to enforce labour legislations with suppliers along the value chain. LVMH could take actions to terminate and ban partnerships with companies that profit from child and forced labour in Uzbekistan such as Daewoo International Corporation (Kwaak, 2014). By 2026, it could set the target of eradicating all cotton sourcing from suppliers with unethical practices. Moreover, it is reported by the Organic Trade Association (OTA) that while the cotton industry utilises 2.5% of the cultivated land, it contributes to 16% of insecticide usage (Business Ethics, 2010). To reduce the undesirable environmental impact such as air pollution, water contamination, soil degradation and species extinction, LVMH should be stringent in tracking the sources and farming practices applied at cotton plantations and aim to reduce pesticide usage in cotton production by 50% by 2026.

 

 

 

 

Gold Sourcing

 

Gold is the main raw material for luxurious jewellery and watches. Approximately 60% of the global gold demand is attributed to the jewellery industry (World Gold Council, 2016). However, the website for LVMH's brand De Beers only states “conflict-free” in the gold sourcing policy without elaboration or any quantifiable goals (De Beers, 2016). Annually, roughly $400 million of gold is illegally smuggled out of countries such as the Democratic Republic of Congo by armed commanders for military rebellion and corruption, with only 35% of gold mines not controlled by armed forces (Enough Project, 2015).

 

To become truly socially responsible, LVMH should be more specific in their gold sourcing, with strict policies and legislation to ensure that gold is not used to fuel conflicts or violence by military groups. The sustainable sourcing information could be provided on the website to raise customer awareness, which would be beneficial for establishment of customer loyalty.

 

 

 

 

 

Animal Testing

 

On LVMH’s 2014 environment report, it was vaguely mentioned that the LVMH Group was taking efforts to solve the challenge of finding alternatives to animal-testing (LVMH, 2014). Although it was stated that the Perfumes & Cosmetics companies of LVMH have banned cruel animal testing, the company is actually retailing these products in countries that by law require animal testing on imported cosmetics such as China (McKie, 2015).

 

To be more mindful and responsible, brands involved in this issue such as Benefit Cosmetics and Christian Dior should be transparent with no deception or hidden agendas in reporting and disclosing their experimental and manufacturing processes. Due to the availability of more advanced technological know-how, equipment and procedures, Britain is assisting Chinese scientists to develop alternative techniques to replace animal testing, while at the same time safeguarding the health of consumers (McKie, 2015). LVMH could engage in this collaboration by facilitating communication and R&D investment, as the gradual replacement of animal testing would reduce expenditure in repeated unethical testing.

 

 

 

 

 

Carbon Footprint 

 

LVMH made an interesting proposition regarding carbon trading - a marketplace model for controlling climate change that began in earnest a decade ago, announcing that it has set up an internal “carbon fund”. A rate of €15 per tonne of carbon that they produce is implied and this money will finance projects at LVMH whose sole purpose is to reduce the company’s emissions. This however did not seem to work since the company’s CO2 emissions rose by around 4% to 28,000 metric tonnes of CO2 from 2013 to 2014. On top of that, LVMH have not been transparent enough in their sustainability strategies where LVMH's sustainability report did not mention a general target for greenhouse gas emission reduction. ‘Rank-a-brand’ website gave an E grade (corresponds to ‘Don’t buy’) for LVMH’s sustainability. In the climate footprint published by LVMH, only 1% of total energy consumption by LVMH is renewable. LVMH did not communicate a tangible policy to reduce the carbon emissions in the supply chain that is beyond their own operations on their website. LVMH need to be transparent about their impact.

 

 

 

 

 

Packaging 

 

LVMH aims to reduce its environmental impact and ecological footprint through increased use of life cycle inventory (LCI) and life cycle assessment (LCA) to help guide the use of packaging. LVMH has already introduced a sub company of its champagne house Veuve Clicquot, namely Naturally Clicquot, which has produced 100% biodegradable and recyclable carton packages and a champagne cooler composed entirely of potatoes and paper.

 

In line with the current trend for sustainable packaging, LVMH should seize the opportunity to rebrand more of its popular consumer goods, such as a ‘Naturally Moët’ or ‘Naturally Krug’. This will increase consumer awareness as well as promote LVMH’s image as a sustainable business. Furthermore LVMH should aim to switch to 100% biodegradable packaging across its other subsidiaries, as well as reducing its material packaging by 15%.

 

 

 

 

 

Labour

 

 

As mentioned under the ‘Leather’ and ‘Cotton Sourcing’ sections, on top of problems encountered related to the environment, there are also  issues related to LVMH’s workforce in developing countries that need to be addressed. Workers’ rights have been severely abused and out of 83 factories surveyed, none paid workers a living wage and the majority of the workers were not paid the local legal minimum wage (Ethical Consumer, n.d.). Forced overtime was very common and workers that refused overtime were verbally or physically abused (Ethical Consumer, n.d.). LVMH need to ensure the maintenance of a healthy workforce by emphasising welfare and meeting all regulations including wages, working hours, working conditions and safety. On top of that, a lack of health and safety guidelines in the supply chain of leather has posed serious health effects to workers in the leather tanning industry in Bangladesh (Ethical Consumer, n.d.). Ensuring that all workers of LVMH are well informed and trained on occupational health and safety is crucial. LVMH should also share knowledge and provide training to local suppliers to overcome their shortcomings in skills, expertise and capacity to meet international standards in terms of quality and safety.