With the studies Deloitte is conducting, do you see an evolution in the way companies integrate ESG matters in their strategies?
It is indeed interesting to note the evolution of the topic’s importance for companies. In 2022, Deloitte conducted the Swiss Watch industry study. When industry players were asked “Why is sustainability important for you?”, the answers were mostly related to mounting interest from consumers and increased pressure from regulations to reduce GHG emissions. It was an outside in influence.
In 2023, we see “greening” of business is stemming more from the “inside-out” influence, showing it is now part of the corporate strategy. A few years ago, sustainability was essentially part of marketing and communication departments, now it is at the heart of operations and leadership. This represents a big shift for luxury companies. The main focus is still on reducing the carbon footprint but it is now part of the global strategy. It is important for the image and the branding of the company. I believe luxury has made that shift as well, due to the pressure of younger generations. Brand image, purpose and company’s values need to be aligned with consumers’ values. Sustainability being part of the corporate strategy of the Luxury groups and maisons allows the industry to change for the better.
From your latest studies it appears, final customers expect more from companies and are taking into account environmental and social impacts of a product/company in their buying decision. Does it really translate in the market?
You always have to be careful about what people say and how it translates in their real-life behaviours. Nonetheless, we see themes of circularity and sustainability getting more and more relevant in buying decisions. Companies are well aware now that if they do not align their products with these values, they will eventually lose these consumers. Even if consumers’ actions are not always fully consistent with their own values, they expect companies to take action on these topics.
You also act as a consultant for companies, helping them with their strategies. Do you feel luxury companies are operating their transition towards sustainable business models?
Most companies have now published their roadmap to net zero and these goals are ambitious. As the quality of data and data gathering improves, companies are faced with the reality that it is difficult and costly to reach those targets. It is both difficult and costly. Companies realize they cannot do it by themselves, and they must get their suppliers and the whole ecosystem on board. It is a common effort that requires common goals and funding. Every brand now understands that the pressure is mounting from all sides, including the regulations which are becoming more stringent. And this is accelerating. Consulting firms are very busy helping companies in their necessary transition.
Can you share some best practices or innovative solutions companies are adopting to address sustainability challenges?
I believe the first very positive observation is that companies are collaborating together. Changes cannot happen alone. The WJI 2030 is a great initiative in that sense. At the product level, there are two factors to acknowledge in the watch and jewellery sector. Firstly, mechanical watches and jewellery have an advantage: they are circular by essence because they are here to stay and can even be passed down to the next generation. Secondly, the development of the pre-owned market is an important factor towards circularity.
What needs to be further explored in the customer’s behaviour towards pre-owned, is whether consumers buy second-hand in addition to a new product or whether it replaces the buying of a new one. But the secondary car market shows that nowadays it is very much embedded to buy pre-owned and both the pre-owned and primary market work hand in hand. The rise of the pre-owned market is certainly a big help for luxury towards more circularity.
The innovation in materials used is also showing the efforts that are being made towards a more sustainable luxury business. Lab grown diamonds prevent more extraction and potential child labour in mines, for example, but you still have to pay attention to the energy use. There are a lot of leather alternatives that show great opportunities to reduce impact, like the grape or apple-based leathers, or rubber from used fishnets. At the packaging level, there are a lot of improvements towards overall reduction in packaging as well as recyclable materials that are introduced. Our study has shown that consumers are very sensitive towards more packaging solutions that are respectful to nature and do not generate more waste.
Companies are experimenting with new business models. Renting models are being tested, particularly in the clothes industry. But it is still an expensive business model, and the right format has yet to be found. Rebuy or trade-in models are developing as well. These are alternatives that need to find the right balance to be efficient financially. The potential has not yet been fully explored.
How do you envision the values of tomorrow’s businesses evolving in relation to sustainability?
I see the trend evolving towards “Buy less, but better”, the exact opposite of the fast-fashion business model. People will want to have less items but keep them longer. This already contributes to less waste. We also see branded jewellery developing into investments, just like luxury in general. Luxury has the advantage of creating value and retaining it. We analyzed the difference between what people were willing to spend on a new watch versus a pre-owned. There used to be a wide gap, this gap is shrinking, as the pre-owned markets is becoming more liquid and getting more traction. It reveals a change in habits, and it is being led by the younger generations.
What advice would you give to other companies looking to enhance their sustainability efforts? First, companies need to put the consumer at the centre. Historically, luxury brands were focusing on their own understanding of the market and showing mainly product-centricity, whereas now the market is clearly moving to consumer-centricity. And this reflects as well in the way sustainability is approached. But the most important advice is: collaborate, collaborate, collaborate, in order to make 1+1 = 3.