Luxury Brands Essay

Luxury Brands: What Are They Doing About Social Responsibility? David S. Waller, Marketing Discipline Group, University of Technology Sydney Anurag G. Hingorani, Marketing Discipline Group, University of Technology Sydney Abstract Although luxury goods may be synonymous with extravagance, lavishness, and even waste, it may appear to be a contradiction that a number of companies that manufacture and sell luxury brands have also discovered the value of being socially responsible. With growing criticism of the high costs and exploitation in the manufacture of luxury goods, some companies are increasing the extent to which corporate social responsibility and sustainability issues feature in their business practices. This paper will look at the issues regarding luxury brands and social responsibility, and will focus on LVMH Moà «t Hennessy Louis Vuitton, the world‟s largest luxury goods conglomerate. Introduction Despite the recent global financial crisis and continuing economic troubles worldwide, sales of luxury brands are growing. According to the Luxury Goods Worldwide Market Study, luxury spending in 2011 rose 8% to â‚ ¬185 billion ($US274 billion) in 2011, with growth in the US, Europe and China, which was after a fall in sales in 2008 and 2009 (Holmes 2011). Brand names like Chanel, Yves St Laurent, Louis Vuitton and Tiffany & Co. have become household names and brands that some people aspire to purchase and wear. However, luxury brands have also been often criticised for being extravagant, overpriced, exploiting third world suppliers, and wasteful when many people are struggling financially. As luxury brands promote themselves to the global audience, some companies are increasing the extent to which corporate social responsibility (CSR) and sustainability issues feature in their business practices. This paper will explore the issues related to luxury brands and social responsibility, with a particular focus on LVMH Moà «t Hennessy Louis Vuitton, the world‟s largest luxury goods conglomerate which includes internationally recognised brands such as Christian Dior, TAG Heuer, Fendi, Marc Jacobs, Guerlain, Kenzo and Givenchy. A content analysis of the 2010 Annual report will reveal the CSR initiatives/activities undertaken by LVMH and some implications for CSR disclosure will be discussed. Background Since some embarrassing corporate ethical and financial disasters, many organisations are taking steps to improve their corporate governance, ethical practice and CSR activities (Agrawal and Chadha, 2005; Margolis and Walsh, 2001). There has been particular interest in CSR, in which there is a â€Å"concern for the impact of all of the corporation’s activities on the total welfare of society† (Bowman and Haire, 1976, p. 13). CSR activities and disclosure have increased with organisations identifying different types of CSR initiatives that they undertake, including those that relate to work output, HR activities, social/community commitment, and environmental initiatives (Gray, Owen and Maunders, 1987; Luo and Bhattacharya, 2006; Waller 2009; Waller and Lanis, 2009). These CSR activities can help promote a specific image that management would like to portray to its various stakeholders, and counter criticism for other issues that may affect the company. The luxury industry thrives on the creation of an image and the communication of brandassociations. This contributes to the interest in luxury brands by many consumers who might want to portray a particular image or feel a certain way by acquiring and consuming luxury goods and services. Not only consumers but also academic and industry researchers are  interested in luxury brands (Bendell and Kleanthous 2007; Fionda and Moore 2009; Kapferer and Bastien 2009; Phau and Prendergast 2000). Most consumers prefer to purchase a wellknown, reputable brand over a cheaper, unknown brand, especially when making highinvolvement purchases, or products that reflect a buyer‟s personality. Luxury provides selfexpression which reflects class, status, and quality. However, at a time when there is increasing unemployment, economic troubles around the world, and a downturn in sales, there is a concern that a luxury brand is elitist and uncaring for the wider community. In 2007, the WWF-UK measured 10 luxury brands on their environmental, social and governance (ESG) performance – and the brands did not fair well (Bendell and Kleanthous 2007). In relation to the marketing of luxury brands in a world of rich and poor, the report states: â€Å"Luxury brands are experiencing rapid expansion in societies that contain both very rich and very poor people. Such societies can view displays of conspicuous consumption as a threat to social cohesion. This is true, for example, in China, where the authorities in Beijing have banned the use of billboards to advertise luxury products and services. In this context, the credibility of luxury products and services will be derived from their ability to generate wellbeing, not only for consumers, but also for those involved in (or affected by) their production, use, reuse and disposal.† The report ranked the top 10 largest luxury goods companies on an environmental, social and governance (ESG) performance ranking. This was based on: (1) what the companies report to the community; and (2) what media and non-governmental organisations have said about the companies. The companies were given a score out of 100, and graded from A (the best) to F (the worst). Out of the 10 companies, none were graded more than a C+ with L’Oreal topping the ranking, followed by Hermà ¨s and Louis Vuitton. By being more proactive in their civic responsibilities and keeping within government regulations in their business operations, an organisation can build a reputation as a good corporate citizen. Some CSR activities that luxury brands can undertake include eco-friendly ingredient sourcing, fair pricing, eco-manufacture, and efficient non-wasteful distribution, as well as corporate sponsorship. This study will examine the CSR activities run by LVMH Moà «t Hennessy Louis Vuitton, the world‟s largest luxury goods conglomerate, via a content analysis of the LVMH 2010 Annual Report. The main company information about LVMH is found in Table 1. Table 1: LVMH Moà «t Hennessy Louis Vuitton Company Information Luxury goods, retail Industry Founded Headquarters Products Brands 1987 Paris, France Clothing, cosmetics, fashion accessories, jewellery, perfumes, spirits, watches and wines Includes: Moà «t et Chandon, Hennessy, Glenmorangie, Fendi, Donna Karan, Givenchy, Kenzo, Louis Vuitton, Marc Jacobs, Parfums Christian Dior, Guerlain, Bulgari, TAG Heuer, Zenith, Hublot, DFS, Le Bon Marchà © â‚ ¬20.32 billion â‚ ¬3.032 billion 83,540 Methodology Organisations can communicate their CSR information through a variety of sources such as advertising, annual reports, public relations and their websites. In this study, the annual report was analysed as this is the only document produced regularly to comply with regulatory requirements and is central to the organisation‟s own image (Gray, Kouhy and Lavers 1995). After finding the LVMH 2010 annual report online from the company website (www.lvmh.com), a search was made for a social responsibility section in the report.