What is Balenciaga, Gucci and Saint Laurent’s owner Kering doing to make fashion greener?

Kering, the Paris-based international luxury goods group, which owns Saint Laurent, Gucci and Balenciaga, has been leading the way.

Francois-Henri Pinault, chairman and CEO of Kering, has been working to rally global fashion companies around a new sustainability pact.

Macron put the issue on the agenda of the three-day G7 summit, which he has been hosting in the French seaside town of Biarritz.

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Pinault has been trying to get companies to sign on to targets that could include eliminating single-use plastics and accelerating their transition to renewable energy.

“You shouldn’t underestimate the work that’s being done at different companies,” Pinault said before the summit began on Saturday.

“The problem is that we’re all working in our little corners, so despite our efforts everything we do is completely offset by the growth.”

The extent of the problem was highlighted one misty June evening on an American beach in Malibu, California.

Traditionally each spring, at high tide during a full moon, schools of grunion fish flop out of the coastal waters in Paradise Cove, to spawn in the sand.

Yet this time the beach was home to another large group of visitors – an army of spindly young men wearing Saint Laurent’s latest collection, including gauzy button-ups, crystal-studded blazers and pointy leather mules.

The models paraded just a few feet from Paradise Cove’s breaking waves as journalists, stylists and celebrity guests flashed their smartphones in appreciation.

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The grunion were nowhere to be seen – an absence that generated angry complaints and letters from Malibu townspeople and officials. In their sight lines: Kering.

Despite the company positioning itself at the forefront of the movement to clean up fashion’s environmental impact it flew in participants from around the world, releasing thousands of pounds of carbon dioxide.

The luxury goods business is walking a high wire.

Fierce competition for consumer dollars and for social media attention is pushing brands to produce ever-flashier events. Surging demand from China has lifted production to unprecedented levels – meaning the manufacturers are using up more natural resources, such as metal hardware, leather skins, and cashmere, than ever before.

At the same time, the industry is facing more pressure from consumers and regulators to curb the environmental impact of its rapid growth, heavily polluting supply chain and loose control of suppliers.

“You have regulators, consumers, and more and more the investors who are making environmental and social criteria an important red flag,” Mario Ortelli, a London-based luxury consultant, said before the summit began.

The industry is starting to wake up, though. Apparel makers including Giorgio Armani and Versace have discontinued the use of controversial materials, such as fur.

Burberry Group vowed recently to stop destroying unsold stock – a widespread practice in the fashion industry to avoid unwanted products being spotted in bargain bins.

In July the industry giant LVMH, the owner of Louis Vuitton, Christian Dior and Dom Perignon Champagne, bought a stake in Stella McCartney’s fashion label, known for working with sustainable materials such as biodegradable shoe soles.

Prada has said it wants to source all of its iconic nylon accessories from recycled materials including ocean waste by the end of 2021.

While Pinault’s brands spin a dream of luxury, he has also made sure that more and more of the looks on display are produced from organic cotton, traceable leather skins or recycled plastic.

Kering says it is also pressuring its networks of suppliers and sub-suppliers to open up about where exactly their raw materials come from, and imposing higher standards on energy efficiency and animal welfare.

In an industry where leather goods drive profits, Pinault is pushing tanneries to invest in new processes for turning animal hides into supple handbags without employing chromium, a pollutant whose use remains widespread. Kering executives have even seen their bonuses tied to environmental performance since 2010.

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“We shouldn’t wait for people to require us to use different materials before figuring out how,” Pinault said. “It’s up to us to come up with products that are respectful of the environment.”

Consumers may associate pollution and waste in the apparel industry with fast-fashion retailers or sneaker makers, whose supply chains often lead to massive factories in loosely regulated countries where labour is cheap. But now the spotlight is widening to fall on luxury companies, too, as a new cohort of young, wealthy clients looks to avoid glamorous products that come with an unsavoury backstory. 

Millennials and Generation Z – those people reaching adulthood in the second decade of the 21st century – will account for four-fifths of the luxury industry’s growth in the coming years, Jefferies analyst Flavio Cereda said in a July report.

Three-quarters of millennials said they would alter their buying habits on environmental concerns; the comparable figure for baby boomers was 34 per cent.

As in the aftermath of Saint Laurent’s Malibu show, social media and smartphones have made it easier for criticism of the industry’s environmental sins to spread.

Previous triggers included videos of suffering crocodiles or cashmere goats at sites that supplied leather or wool for luxury brands. Burberry’s burning of millions of dollars worth of unsold merchandise prompted some shareholders to demand change.

More than any other company, Kering illustrates the luxury industry’s tension between needing to sell a dream of excess and indulgence while assuring consumers it can be done without hurting the planet.

The French group’s blockbuster turnarounds at Gucci as well as Saint Laurent and Balenciaga have seen earnings more than double since 2014, but Kering is still viewed as a scrappy upstart in comparison with stalwarts such as Hermès International or the much larger LVMH.

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Investors in the Gucci owner have learned to expect rapid quarterly growth – so improvements to environmental impact are easily offset by the rising volumes.

While LVMH has been tackling the same environmental challenges behind closed doors, Kering and Pinault have opted to speak about them openly.

The company’s “environmental profit and loss” accounting allows anyone to view where and how its supply chain is affecting the environment, whether it is intensive land use at cashmere farms in Mongolia or water pollution from Bolivian mountain mines, where silver is extracted for jewellery.

This allows the Gucci owner to convert its environmental impact to a dollar amount – just over €500 million (US$554.8 million) last year, Kering estimates. The goal is to reduce the environmental impact relative to sales by 40 per cent.

Half of that would come from implementing better practices throughout supply chains, as well as boosting the use of more sustainable materials such as organic cotton. The other half would need to come from yet-unidentified innovations.

Even if Kering were to reach its target, the frenetic growth rate of the fashion industry, particularly for successful brands such as Gucci, means that it would still be a long way from reducing the impact in absolute terms.

A report in May by the Global Fashion Agenda, a group that is campaigning for a more sustainable industry, found that efforts to lessen the environmental impact are not keeping up with growth.

Annual production of clothing and footwear, on track to reach more than 100 million tonnes by 2030, will exert “an unprecedented strain on planetary resources”, the report said.

“Fashion is an industry that knows it’s unsustainable, and luxury is at the top of that value chain,” said Michael Stanley-Jones, co-secretary of the UN Alliance for Sustainable Fashion.

The textile industry is the second-biggest polluter of water, and fashion accounts for 8 per cent of carbon emissions worldwide, a share that is rising. “You’re seeing runaway growth that’s pretty aggressive. It’s alarming.”

The steps most crucial to progress in sustainability are often the most difficult to control. Brands as prestigious as Gucci still struggle to figure out where their raw materials actually come from.

“Made in Italy” and made “in-house” are two different things and even top-end brands have had to fight an uphill battle to gain visibility into the vast network of contractors and subcontractors involved in making every look.

Verifying that cows are being raised humanely and that breeders used land responsibly would require being able to trace a leather hide back to the farm. Currently, Kering can only trace it to the slaughterhouse.

“One particularity of the fashion industry is that we’re not vertically integrated,” Pinault said. “I don’t own the cotton fields. We aren’t spinning thread.”

If Kering is willing to speak openly about its environmental challenges at the corporate level, its brands are often less eager to do so with consumers.

Gucci has raised the share of metal-free tanning in its handbags from 0.2 per cent to 13 per cent. That leaves a majority of the brand’s leather still made with potentially toxic chromium – not a great marketing pitch.

At a Gucci boutique next to Paris’ Place de la Concorde, products made with more eco-friendly materials have been quietly mixed in with the items on display.

Bestselling products such as a cardinal-red Dionysus handbag – a €1,980 model recognisable for its serpent clasp – are prominently displayed but carry no tags telling shoppers that they are now tanned without the use of potentially toxic chromium.

Nor will you find any indication that the palladium hardware on the new Zumi handbag line is sourced from recycled medical equipment.

Slowly, however, brands are starting to respond more openly to sustainable fashion demand. Gucci, for example, publishes its environmental policy on its website. 

Kering’s Bottega Veneta, known for its expertise in high-quality leathers, is introducing alternatives under its new designer, Daniel Lee. A forthcoming collection includes pouches and cross-body bags made out of pressed cork and fennel.

At Kering’s Materials Innovation Lab, one executive has spent years building a library of sustainable materials, lobbying brands to implement them in their collections as well as pushing the suppliers to adapt them to better suit their needs.

One recent initiative by the lab involves working with US cotton trade group Supima to roll out cotton with a documented “chemical fingerprint”.

 That allows a swatch from a poplin shirt to be traced all the way back to the farm.

Sustainability and traceability initiatives that started as “risk management” for the fashion industry will eventually become drivers of value and a competitive advantage, Ortelli said – even if most consumers are not paying attention yet.

Companies that do not invest in reining in their environmental footprint deeper in the supply chain is likely to struggle to compete in the future, he said.

“Today there is a lot of talk about the issue of sustainability,” said Luca Solca, luxury analyst at Sanford C. Bernstein. Meanwhile there’s “not much of a way to tell” which brands are actually investing in turning that talk into action.

Kering declined to comment on the environmental impact of its destination fashion show in Malibu, other than to point out that it recently formed a working group on reducing the environmental impact of fashion shows with LVMH, which also flew guests as far as Marrakesh and New York for destination shows this year.

As for the Malibu event a city spokesman said Kering cleaned up plastic sandbags and water bottles afterward.