LVMH Does Sustainability Differently. A Top Exec on Its $30-$Year Journey.

Sustainability took root at LVMH Mo$$t Hennessy Louis Vuitton SE more than $30$ years ago, in the year of the International Earth Summit in Rio de Janeiro. That$$s when its billionaire founder, chairman, and CEO Bernard Arnault created an environmental development unit. By the late $1990$s$,$ LVMH was collecting environmental data across several of its masons, and by the early $2000$s$,$ some of these brands were measuring their carbon emissions.

$$It$$s really not a new journey for us$,$ says Arnault$$s eldest son, Antoine, chief executive of LVMH$$s holding company, Christian Dior SE$,$ and vice chairman of its board.

Yet, its odyssey toward sustainability is not one the luxury group has been all that public about until a few years ago, says Arnault, who is also chief executive of LVMH$$s Paris$-$based men$$s shoemaker Berluti, chairman of its Italian luxury clothier Loro Piana, and oversees image and communications at LVMH$.$

$$We always had this idea that we needed to act in silence, that it wasn$$t something that would really interest either our consumers or opinion makers, and it$$s something that we did quietly,$$ he says.

The approach included $$difficult decisions,$$ Arnault says. Among them was not signing the Fashion Pact spearheaded by Kering CEO Fran$$ois$-$Henri Pinault at the request of French President Emmanuel Macron in $2019.$ The pact committed fashion and textile companies to several environmental goals.

Instead, the group worked with its brands to develop a $$realistically achievable plan,$$ Arnault says. $$It$$s very important that everything we say is true, that everything we say can be checked and can be measured.

$$LVMH$$s reticence opened it to criticism by those who described the luxury group$$s progress toward sustainability as behind peers such as Kering and Herm$$s; Bernard Arnault$$s $2019$ denouncement

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of climate activist Greta Thunberg as preaching $$catastrophism$$ didn$$t help. But LVMH became more visibly proactive, investing a minority stake in Stella McCartney$$s eponymous British sustainable fashion brand in July $2019,$ just over a year after she left Kering.

Sustainability directors at each of the brands meet regularly and work together on themes ranging from packaging to circular economy initiatives to climate. Goals such as cutting $55\%$ of so$-$called Scope $3$ emissions from supply$-$chain sources, transportation, and the use of LVMH products, or ensuring that all products throughout the group$$s supply chains are traceable to their source, are ambitious.

But they also are increasingly demanded by regulators in Europe and, to a lesser but increasing degree, in the U$.$S$.,$ United Kingdom, and China.

LVMH$$s view is that the regulators are just catching up$.$ The group $$was a pioneer in environmental issues,$$ Valade says. $$Regulation often arrives after pioneers take an experiment and expand this progress for all companies.$$

But the luxury giant$$s strategy is also to understand where regulations are headed and to have a say in how they are created. $$Most of the time, in $95\%$ of the cases, we exceed these regulations even way before they$$re implemented,$$ Arnault says. For the remaining $5\%,$ LVMH tries to change them, or they comply $$with a big bag of sorrow,$$ Arnault says, because they aren$$t applicable to the luxury brand.

For LVMH$,$good goal setting, strong governance to achieve $[$its$]$ goals, and robust accounting of impact, whether it$$s their emissions or traceability of commodity usage as well as water use,$$ led to their top scores, says Simon Fischweicher, head of corporations and supply chains for CDP North America.

This includes lot of questions are directed at the corporate risks of not addressing environmental issues, Fischweicher says. Companies often resist quantifying these risks, but LVMH has $$really robust$$ disclosure, he says. As an example, the group details the potential regulatory costs of putting a price on carbon emissions to their businesses reaching $$180$ million and discusses how they are managing that scenario.

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Louis Vuitton is the largest luxury brand in the world, responsible for just over half of LVMH$$s estimated operating profit last year, according to HSBC$.$ The fashion and leather goods maker have its own sustainability strategy that is interlinked with LIFE $360$ although with some tighter deadlines. Its goals include ensuring $100\%$ of raw materials used in its products are recycled or certified as environmentally sound and eliminating single$-$use packaging all by $2025,$ a year ahead of the group.

Already, $78\%$ of raw materials meet that standard, and single$-$use plastic packaging is down by $43\%,$ says Christelle Capdupuy, the brand$$s global head of sustainability.

The Leather Working Group certifies tanneries producing one of Louis Vuitton$$s most critic