LVMH Moët Hennessy - Louis Vuitton Société Européenne on June 30 was quizzed by shareholders on a range of ESG-related issues including climate and biodiversity, indicating investor interest in pushing highly profitable luxury companies to operate in a more sustainable way.
At the company's annual general meeting, held as a closed session at its Paris headquarters, LVMH noted that 2019 had been an "outstanding" year in terms of sales and profit while acknowledging that the COVID-19 pandemic had hurt operations substantially in the first and second quarter of 2020. But the bulk of shareholder questions, sent in via letter or email, appeared to focus less on the pandemic and LVMH's core luxury business and more on ESG matters.
"What is the list of activities that are not compatible with the Paris [climate] agreement? What actions have you taken to disengage from such activities in 2020?" one shareholder asked.
A company executive, relaying the answer provided by CEO Bernard Arnault and the group managing director on behalf of the board, said LVMH had a goal of cutting CO2 emissions by 25% by resorting to a 30% renewable energy mix, which it had achieved in 2019 "even though over the past six years, LVMH enjoyed significant growth."
In response to a question about the impact of LVMH's activities on the environment, the company said its policy was to deploy "the most stringent social and environmental requirements in 70% of the supply chain by 2020 and then 100% by 2025." For example, 100% of French vineyards operated by the company are covered by certificates of sustainable winemaking. Similarly, in October 2019, the company's Guerlain perfume brand teamed up with UNESCO on a five-year training and support project for beekeepers, to combat the alarming rise in bee mortality worldwide.
LVMH also pointed out to shareholders that many of its luxury businesses do account for social and environmental criteria in their profit-sharing arrangements with employees. The company, which makes Krug, Veuve Clicquot and Moet & Chandon, said that in the Champagne area its profit-sharing agreements include criteria such as sustainable development, energy, waste sorting and accident rates. Christian Dior's profit-sharing plan considers the reuse of waste, such as the recyclable part of rejects.
Another shareholder wanted to know: would LVMH give up using fur and exotic skins for its products? LVMH indicated it intended to keep using such materials as long as the procurement complies with "traceability of supplies, animal welfare and, lastly, the respect for local populations, the environment and diversity."
In his opening remarks, Arnault noted that LVMH in 2019 had also increased its engagement on biodiversity, animal welfare and deforestation. In August, for example, the company agreed to contribute €10 million to help fight fires in the Amazon.
But critics say that headline-grabbing announcement masked deeper problems. They suggest that LVMH's iconic Louis Vuitton fine-leather handbags could be sourced from cattle reared in the areas that once were Amazonian rainforest.
An assessment of the 350 most influential companies in forest-risk supply chains by non-profit Global Canopy published in April 2020 found that the leather industry was still the worst performing when it comes to commitments to address tropical deforestation. More than 80% of the 64 most influential companies assessed for leather in the 2019 Forest 500 annual report had no commitment to source deforestation-free leather.
"Leather's links to South American deforestation can be hidden behind a label. Although leather goods might be processed in Italy or China, earning them a 'Made in Italy' or 'Made in China' tag, the leather hides may have originated in Brazil, Paraguay or Argentina, where cattle are herded on land that may recently have been forest," said Global Canopy in a summary of its findings.
LVMH, the non-profit group said, "did not have a commitment to stop sourcing leather from deforested areas at the time of the 2019 assessment, so could still have been buying leather from sources who have exacerbated the fires."