n 1972, the Club of Rome published “The Limits to Growth”, also known as the Meadows report. It warned of the finite nature of Earth’s resources, set against the capitalist growth model.

Now, half a century later, the planet’s limits have been substantially exceeded. In 2023, Earth Overshoot Day fell on 2 August. In 2021, we were already using more than 101.6 billion tonnes of resources per year. Projections by Circularity Gap suggest this will increase to between 170 and 184 billion tonnes by 2050.

After the hottest June since measurements began, July set a distressing new record for the hottest month ever. That record was broken in September. The frequency of extreme weather events, including devastating fires across the Mediterranean, Hawaii and Canada, declining sea ice in the Antarctic and temperatures exceeding 50°C (in the shade!) in 21 countries, has risen dramatically. Despite these alarming trends, and repeated warnings from entities like the IPCC, the global response is basically “business as usual”.

Nevertheless, Deloitte’s 2023 CxO Sustainability report indicates a growing corporate awareness of the issues. It states: “Many CxOs rated climate change as a ‘top three issue [...]. In fact, only economic outlook ranked slightly higher. Many CxOs (61%) said climate change will have a high/very high impact on their organization’s strategy and operations over the next three years.“

It’s a hopeful sign. Similarly, Deloitte’s 2022 report on GenZ and Millenials – the luxury goods consumers of the future – shows that 64% of them are willing to pay more for sustainable products. However, the 2023 report reveals that 84% of environmental directors believe that economic growth can coexist with climate goals. Clearly, growth is still the primary objective.

And yet, it is clear that increasing sales are closely correlated with an increase in environmental impact, as evidenced by the ESG reports of major luxury groups.

The numbers speak for themselves

For example, Richemont group’s turnover rose to €19.9 billion in 2022, a 19% increase from 2021. In the same period, carbon emissions grew by 23.8%, as detailed in their 100-page 2023 ESG report (from 1,542,800 TeqCO₂ [tonnes of CO₂ equivalent] to 1,906,626 TeqCO₂).

The trend does not seem to be heading in the right direction. As Richemont explains: “The rise in GHG emissions can be attributed to overall business growth driving production volumes, capital and operating expenditures. Moreover, Covid-19 recovery in some markets led to increased business travel. Lastly, the acquisition of Delvaux in June 2021 and its full integration into Richemont’s GHG footprint in 2022 contributed to our emission growth.”

Richemont Group emissions by Scope

In the following pages, the increase in emissions is connected to the impact of its biggest contributing items: “Emissions from purchased goods and services increased by 20% compared to 2021. (...) Richemont business growth in 2022 directly impacted emissions from services’ operating expenditure, purchased finished goods and raw materials. (...) Upstream transportation and distribution represent the second highest category of our Scope 3 emissions, which rose by 25% compared to 2021.”

Evolution of the Richemont Group’s emissions by activity and by Scope

Admittedly, efforts have been made and positive results have been obtained in terms of water consumption (down to 660,000 m³ in 2022 from 985,000 m³ in 2019), for example, or in terms of intensity (TeqCO₂ emitted per million euros of revenue), but the fact is that emissions – and thus environmental impacts – continue to rise in absolute terms. And under the terms of the Paris Agreement, by 2030 we need a 43% reduction in emissions, in absolute terms, not relative!

Richemont Group emissions by emissions category

The world’s largest luxury goods group, LVMH, is in the same boat, despite having made a robust commitment, as evidenced by the quote at the top of the Sustainability 2022 report by Antoine Arnault, Director of Image and Environment, and Hélène Valade, Director of Environmental Development: “LVMH’s deep commitment to the environment aims to change how beauty is portrayed, to make sustainability synonymous with desirability, to make circular economy models a must, and to champion an entirely new type of relationship with nature and the living world. LVMH leads by example to help safeguard ecosystems.”

Breakdown of LVMH Group emissions by activity in 2021

Their 2026 target is ambitious: “LVMH plans to reduce its Scope 1 and 2 (direct footprint, including energy consumption at its own sites) greenhouse gas emissions by 50% by 2026 and its Scope 3 (carbon footprint generated by its supply chain and indirect activities) emissions by 55% per unit of value added by 2030, both relative to 2019.”

Breakdown of LVMH Group emissions by activity in 2022

Results are not keeping pace with ambitions. Even if LVMH succeeded in improving its carbon footprint with a 11% reduction in GHG emissions linked to Scopes 1 and 2 compared with 2019, a 15% Scope 3 reduction only affects emissions per unit of value, i.e. the intensity of energy consumption. In absolute terms, environmental impact has risen from 5,706,670 TeqCO₂ for Scope 3 in 2021 to 6,135,00 TeqCO₂, an increase of 7.5%.

If we want to go into more detail, the tables on the carbon footprint for 2021 and 2022 show an increase in the impact of the Watches & Jewellery business from 5% of 5.7M TeqCO₂, or 285,333 TeqCO₂, to 15% of 6.135M TeqCO₂, or 920,250 TeqCO₂, i.e. an increase of 222.6%. It’s hard to see how an increase in sales can be compatible with a reduction in the overall impact.

Swatch Group published results that might seem encouraging in its 2022 sustainability report: a reduction in Scope 1 & 2 emissions from 55,385 TeqCO₂ in 2021 to 52,068 in 2022, a 6% reduction, while sales grew by 2.5%. However, there is no data on Scope 3, which accounts for between 80% and 95% of emissions.

Some positive points

The good news in all these reports lies in the area of social impact (the “S” part of ESG). All the groups show positive results: increased gender parity, increased diversity, preservation of traditional craftsmanship, eco-design training, participation in community development initiatives, etc.

But as Stéphane J.G. Girod, Professor of Strategy and Organisational Innovation at IMD (International Institute for Management Development) in Lausanne, points out, “Even if we take into account the positive impact of the “S” part, with more jobs, more education, even philanthropy, the negative effects in terms of “E”, environment, are catastrophic, particularly on Scope 3, which represents the bulk of the corporate footprint.”

Stéphane J.G. Girod, Professor of Strategy and Organisational Innovation at IMD (International Institute for Management Development) in Lausanne

He goes further: “Companies need to ask themselves about the hierarchy of needs. Reducing the impact of their Scopes 1 and 2, increasing their positive impact on society, on human beings, is all well and good. But they should realise that the environmental dimension takes precedence over everything else. Without healthy ecosystems, abundant natural resources and a favourable climate, there can be no healthy societies (S and G). Studies show that luxury companies, by raising their prices and lowering volumes, can remain highly profitable, even if at a level very slightly below current levels, which would largely ensure their ability to invest in a sustainable transition. But right now, no one seems ready to take the plunge.”

Frugal luxury?

Finally, the concept of frugality, a rather foreign notion in the luxury world, is beginning to emerge. Although absent from most reports, it puts in an appearance on pages 92-93 of the LVMH report: “LVMH adopted an energy efficiency plan in September 2022. It features three flagship measures concerning lighting in stores (shop window display lighting to be turned off between 10 pm and 7 am) and administrative offices, ambient temperatures at workshops, administrative and retail sites, and energy-saving measures, such as lowering screen brightness and deleting unused documents (...).”

Clearly, the concept is restricted to frugality in energy use in boutiques and workshops... with the aim of reducing costs, as confirmed by the priorities on page 93: “Energy efficiency and renewable energies represent the major drivers of LVMH’s strategy to curb its carbon impact and energy costs in its stores, its manufacturing facilities and its administrative offices.” Frugal luxury is not yet a reality.

It seems that no one is ready to talk about what real frugality means, which is frugal consumption. The figures for the watchmaking industry, which continue to break records, confirm this and are a perfect illustration of the paradox of the luxury sector as a whole. Stéphane J.G. Girod puts it another way: “Many are making efforts to make their supply chain more virtuous. Products are therefore becoming more eco-friendly and sustainable... but on the other hand, marketing is not changing at all. It’s still pushing for more consumption, creating opulent events that are increasingly questionable. I see a kind of schizophrenia between the desire to be exemplary in production and the desire to sell even more product. The current structure of executive remuneration – still largely based on growth – definitely plays a role in this.”

Some brands, however, seem to be demonstrating that it is possible to reduce their impact... despite an increase in sales. Breitling, for example, states in its Sustainability Report 2023 that overall emissions (Scope 1, 2 and 3) have fallen from 21,445 in 2022 to 20,030 TeqCO₂ in 2023, a drop of 6.6%, even though their sales exceeded one billion Swiss francs this year.

Breitling’s 2022 emissions in by emissions category, and targets for 2032 and 2050

Aurélia Figueroa, Global Head of Sustainability at Breitling, explains the result: “We identified gold sourcing as one of the highest emitting items for the company. We decided to invest with our suppliers [members of the Swiss Better Gold Association] to enable them to use renewable energy for extraction. This meant we could reduce the impact of this item by 33%. And we will continue in the same spirit to achieve our target of a 46.2% reduction in our emissions by 2032.”

Aurélia Figueroa, Global Head of Sustainability at Breitling

Is there light at the end of the tunnel? The fact remains that, given the urgency of the climate challenge, decoupling revenue growth from impact will be extremely difficult to achieve. Even technological advances are unlikely to help, at least not in time, says Stéphane J.G Girod: “New technologies are being developed to mitigate environmental impacts, such as carbon capture from the atmosphere or SAF [Sustainable Aviation Fuel]. It sounds like a good idea, but it all feeds into ’business as usual’ and doesn’t do anything to encourage a profound change of mentality.”

He adds: “If luxury were only about preserving cultural heritage, craftsmanship and creating beauty to embellish life, perhaps it could become frugal. But luxury is also a marker of social status, and today it remains part of a narrative of accumulation to show off one’s success. In this sense, the terms luxury and frugality seem to me to be incompatible.”

The notion of frugality is not new. The Meadows report of 1972 offered some hope, noting that “Man can create a society in which he can live indefinitely on Earth if he imposes limits on his production of material goods to achieve a carefully chosen level of overall balance between population and production.”

Final thoughts

So, should the luxury sector draw inspiration from this to set an example? We’re quickly running out of time. Covid-19’s enforced pause resulted, for the first and only time, in a 7% drop in global CO₂ emissions, according to the Global Carbon Project. But they have since picked up again – an increase of 6% in 2021 and 0.9% in 2022, according to figures from the International Energy Agency – to set a new all-time record, which will no doubt be beaten in 2023.

As a reminder, in order to achieve the Paris Agreement target of reducing emissions by 43% by 2030, to keep the global average temperature rise below 1.5°C, it will require a reduction of 8% per year, every year! It’s quite clear that frugality, whether chosen or imposed, is an effective way of reducing environmental impact.

Press release from Chartreuse Verte SA explaining the decision to stop expanding its production.

One alcohol company, Chartreuse Verte, issued a highly unusual and courageous press release this year in the face of ever-increasing global demand for its product. In essence, the letter states: “In 2021, the decision was made by the Carthusian monks not to increase their production volume for Chartreuse liqueurs (....) In addition, the monks are not looking to expand their business beyond what they need to sustain their order. Making millions of cases does not make any sense in today’s environmental context and will have a negative impact on the planet in the very short term. This unexpected situation leads us to make a strategic decision for the mid-term by placing all our markets, including France, on a quota (....). Basically, we’re looking to do less but better, and for longer.”

Will the luxury sector one day see the emergence of its own Green Chartreuse? Which company will stand up and show us what truly frugal luxury looks like, and how it can be compatible with sustainable consumption? Perhaps frugal luxury will become more than just the ultimate oxymoron.