{"id":13509,"date":"2016-11-04T17:42:14","date_gmt":"2016-11-04T21:42:14","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/cashmere-crisis-how-climate-change-threatens-luxury-products\/"},"modified":"2016-11-04T17:42:14","modified_gmt":"2016-11-04T21:42:14","slug":"cashmere-crisis-how-climate-change-threatens-luxury-products","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/cashmere-crisis-how-climate-change-threatens-luxury-products\/","title":{"rendered":"Cashmere Crisis: How Climate Change Threatens Luxury Products"},"content":{"rendered":"

\u201cGiven the luxury sector\u2019s reliance on high quality raw materials, we must understand the potential vulnerabilities that climate change will pose to them and be proactive in building resilience across our supply chains.\u201d\u00a0<\/em><\/p>\n

– Marie-Claire Daveu, Chief Sustainability Officer, Kering<\/p>\n

Designer brand house Kering, home to such high-end labels as Gucci, Alexander McQueen, and Balenciaga, employs over 38,000 people globally and generated over \u20ac11.5 billion in revenue in 2015 [1]. As a portfolio of luxury brands, Kering relies on high-quality and precious raw materials to produce fashion garments and accessories. These raw materials \u2013 particularly cashmere, but also others such as cotton, leather, vicu\u00f1a, and silk \u2013 are especially sensitive to climate change, presenting risks to the company\u2019s future ability to source the inputs of the luxury goods they produce. Diversification across suppliers and materials will not be enough to protect Kering\u2019s brands\u2019 product lines and production processes from the effects of climate change.<\/p>\n

Climate Changes & Production of Cashmere<\/strong><\/p>\n

Cashmere, a fiber material made from the winter undercoat of certain breeds of goats, is a prime example of a raw material in high demand that is greatly affected climate change-associated risk. Kering\u2019s luxury brands seek out premium cashmere fibers from the neck region of Hircus goats from the Mongolian steppe region, historically the best source of materials to create the warmest and softest finished goods [2]. The quality of cashmere fibers is highly reliant upon the growth of the goats\u2019 winter coats, which in turn is largely determined by water availability and winter temperature levels. In recent years, climate change and over-grazing have increased the frequency of a natural disaster phenomenon unique to Mongolia known as a dzud, when a summer drought is followed by extremely cold and snowy winters, potentially resulting in the deaths of large swaths of the livestock supply [3]. In response, Mongolian herders have been increasing the size of their herds, unintentionally further degrading the pasturelands and increasing the desertification of the steppe region [4]. Between the weather fluctuations and human interference, the quantity and quality of cashmere supply has become unpredictably variable, yet Kering is still faced with trying to increase production of cashmere garments and accessories to meet growing consumer demand.<\/p>\n

Introduction of an Environmental P&L<\/strong><\/p>\n

In an attempt to create visibility into sustainability issues, Kering introduced the concept of an Environmental P&L (EP&L) in 2011. They hoped the new reporting would allow the company to account financially for the impact of its activities on the environment and aid them in making more sustainable business decisions [5].\u00a0They continue to publish such annual EP&Ls and have since open sourced the methodology to encourage other manufacturers to adopt the practice as well, believing that collaboration and cross-company scale are the only ways sustainability issues can realistically be solved [6]. \u00a0Kering hopes that quantification of environmental impacts within their supply chain will help them prioritize their sustainability efforts and be able to measure the impact of sustainability solutions they implement [7].<\/p>\n

Partnering with BSR to Share Learnings & Propose Solutions<\/strong><\/p>\n

In 2015, Kering partnered with the non-profit Business for Social Responsibility (BSR) to publish a report entitled \u201cClimate Change: Implications and Strategies for the Luxury Fashion Sector\u201d on the risks to the industry of climate change and propose potential solutions to mitigate them. By making the information public, Kering hoped to inspire other luxury fashion companies to build out business plans more resilient to climate change risk [8].<\/p>\n

Looking at future risks to cashmere supply, the BSR report proposes a number of long-term initiatives to reduce variation in and increase the sustainability of supply including:<\/p>\n