Gucci Launches Sustainability Drive as European Fashion Regulation Looms

Italian luxury brand Gucci is set to launch a hub in Tuscany promoting more durable and less wasteful fashion, as it joins efforts by the sector to meet comingEuropean regulations requiring companies to limit their impact on the environment.

The so-called circular hub will be a research-and-development centre to study ways to improve circularity, including through better durability and recyclability of products, as well as minimising waste and pollution from production to end of life. It will boost transformation in the Italian fashion industry’s production models, said Gucci in a joint release with French parent Kering.

Kering said the hub should promote the use of fewer natural resources and reduce greenhouse-gas emissions. While it didn’t detail how much it expects the hub to benefit the environment, the company did say it would cut the emissions from managing waste generated by Gucci’s leather-goods production by up to 60%.

Kering expects the hub to act as a forerunner for new models that it anticipates will be made obligatory by European regulations in the coming years. Last year, the European Union set out a plan to reduce the environmental damage of the apparel industry, which contributes as much as 8% of total greenhouse-gas emissions, according to United Nations estimates.

All makers of clothes and accessories would be subject to the new measures, even if the higher quality of luxury products and the brands’ typically more local and integrated supply chains tend to make them less environmentally damaging than the products manufactured by fast-fashion companies.

Clothing should be “long-lived and recyclable, and to a great extent made of recycled fibres,” the EU said in its proposed plan. It said labelling should make it easier for consumers to gauge the impact of what they buy.

Legislation in the EU will be formulated to enforce the new measures over the coming years, but some countries are moving ahead on their own. France has introduced a law obliging clothing producers and retailers in France to make clear to consumers the environmental impact of their products, including the amount of recycled material, the use of renewable energy in their production and their recyclability. The regulation applies to larger companies that had annual revenue above €50 million, equivalent to roughly $53 million, as of the beginning of this year and will be applied to smaller players from next year.

Companies are also working to comply with potential supply-chain regulations that could require larger firms operating in the EU to identify, prevent and remedy risks to human rights and the environment in their supply chains, such as minimum age requirements, worker safety, pollution and biodiversity loss.

Some fashion and consumer-goods companies have turned to new technology to help gather data on their supply chains and track material, though transparency remains tough to achieve in many cases. But luxury-goods companies such as Kering have an advantage over brands that sell to more general consumers, analysts at financial services company Jefferies said in a research note this week.

“Luxury brands generally have strong and transparent supply chains and an opportunity to better communicate sourcing quality,” they said.

On the other hand, high-end brands also come under more scrutiny, said Luca Solca, a luxury-goods analyst at brokerage Bernstein.

“Luxury brands have the burden to stand for our better selves, as they embody people’s aspirations and ideals,” Mr. Solca said. “In this respect it is on them to stand up to scrutiny when it comes to respecting the environment and society.”

Waste is a particularly tricky proposition for luxury brands, which have traditionally incinerated unsold stock to avoid discounting their products or diluting their brand image. The EU’s plan envisages requiring retailers to disclose how they deal with unsold textiles and even contemplates a possible ban on destroying unsold or returned clothes.

That would pose a problem for brands that don’t recycle or resell much of their leftover stock. In 2018, U.K. luxury fashion house Burberry said it would stop burning unsold inventory amid pressure from environmental groups, but some peers continue the practice.

“Product destruction can cause consumer backlash if reported in the press, [while] off-price sales are detrimental to brand equity,” Jefferies said. “Thus recycling is the preferable option, yet is an additional cost.”

However, some companies are starting to see the durable nature of luxury products as a life-cycle management opportunity. Kering-owned fashion house Bottega Veneta recently introduced a lifetime warranty on its handbags and the wider industry is increasingly open to allowing resale via secondhand luxury platforms.

Gucci’s circularity hub in Tuscany will involve all Kering facilities in the region, including Gucci’s production sites, raw materials suppliers and finished product producers. The hub’s activities will later be extended to Kering’s other brands, before opening to the wider fashion sector.

“The fashion industry needs to accelerate and launch serious actions to catalyse deep change, rethinking the way we produce and use resources as well,” Kering Chief Sustainability Officer Marie-Claire Daveu said.

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