Engagement

 

Engagement is of great importance for EAM‘s sustainable investment approach. It

combines own initiatives with collaboration on a national and international level.

The structured engagement process is based on the „EAM Engagement Guideline“

which determines engagement issues, approach and procedures.

 

Luxury producers

 

It’s Christmas time – the time of year when consumers like to spend a little more on luxurious gifts. In 2013

the market volume of luxury goods such as textiles and jewels amounted to USD 217bn. In the past 20 years

there have been only two phases where spending was on the decline, with the shortfall being recovered as early

as the following year. At revenues of USD 74bn, Europe’s demand leads North and South America (USD 69bn)

and Asia (USD 46bn).

Given that textiles account for a significant share of the

luxury goods industry, Erste Asset Management contacted

companies from that sector. We wanted to obtain infor-

mation about the social and environmental standards in

their supply chain, addressing the lack of transparency of

luxury producers with respect to sustainability often

claimed by research agencies. To this end we contacted

Burberry, Christian Dior, Hermès, Hugo Boss, Moët

Hennessy Louis Vuitton (LVMH), and Prada. Four of these

companies did not react to our enquiry. LVMH promised

to answer our questions, but has not been heard of since.

Only one company, Hugo Boss, was prepared to talk

about its sustainability strategy. This is the weakest

response rate EAM has ever experienced – which

confirms the assumed lack of transparency of luxury

goods manufacturers.

No matter where you look for sustainable strategies in the luxury goods segment, your search will probably

be in vain. Of the aforementioned companies, only Hugo Boss issues a separate sustainability report. All other

firms only dedicated a small section of their annual report to sustainability.

Only 1 out of 6 luxury producersresponded to our enquiries

In past engagements we found that producers have a hard time steering the sustainability activities of their

suppliers. For that reason we asked Hugo Boss what criteria the company paid particular attention to with

regard to its suppliers. The company points out that it demands a range of minimum standards; they are much

more stringent and detailed for social criteria than for environmental ones. Said standards range from the ban

of child labour to the demand of freedom of association and wage negotiations. While Hugo Boss tries to reduce

the environmental pollution caused by its suppliers, its demands do not do not go beyond compliance with

statutory requirements.

 

(Richard Boulanger)

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