Emissions Metrics

GHG/CO2e Emission Reduction

Reduction in Scope 1 Emissions: Scope 1 emissions refer to direct emissions from owned or controlled sources. Many fashion and luxury brands have committed to reducing these emissions by implementing energy-efficient processes and transitioning to cleaner energy sources within their operations. These reductions are often highlighted as a key metric in ESG reports, demonstrating the brands' efforts to lower their carbon footprint at the source.

Reduction in Scope 2 Emissions: Scope 2 emissions are indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the company. Brands in the luxury sector often report on their initiatives to reduce these emissions by increasing their use of renewable energy, improving energy efficiency in their facilities, and optimising their energy procurement strategies.

Reduction in Scope 3 Emissions: Scope 3 emissions encompass all other indirect emissions that occur in a company’s value chain, including both upstream and downstream activities. This includes emissions from the production of raw materials, transportation, and the use and disposal of products by consumers. Reducing Scope 3 emissions is particularly challenging, but brands are increasingly focusing on this area by collaborating with suppliers, improving product design for sustainability, and promoting circular economy practices.

Carbon Neutrality Goals

Carbon neutrality refers to achieving a balance between emitting carbon dioxide (CO₂) into the atmosphere and removing or offsetting an equivalent amount of CO₂, effectively reducing net emissions to zero. In other words, an individual, company, or nation is considered carbon neutral when they ensure that the amount of carbon they release is equal to the amount they offset or remove through various means. Several luxury brands claim that they have already achieved carbon neutrality for their operations or for specific products. This is typically accomplished by a combination of emission reductions by adopting cleaner energy sources, improving energy efficiency, and using sustainable practices and carbon offsetting initiatives (for example, such as reforestation, renewable energy, or carbon capture technologies). ESG reports often highlight these achievements as a milestone in the brand's sustainability journey.

Many brands set future targets for achieving carbon neutrality, often aligning with international climate agreements such as the Paris Agreement. These targets are usually part of a broader strategy to decarbonize their entire value chain by a specific date. The progress towards these targets is regularly tracked and reported, providing transparency and accountability to stakeholders.

In their ESG reports, many companies talk about their carbon neutrality goals in terms of either what they have already achieved, or what they intend to achieve in the future. As an example, a sneaker company can achieve carbon neutrality by using sustainable materials, powering factories with renewable energy, optimising manufacturing and transportation processes to reduce emissions, minimising waste, and offsetting any remaining carbon through projects like reforestation or carbon capture. Similarly, a leather bag brand can achieve carbon neutrality by sourcing eco-friendly or recycled leather, using sustainable dyes and materials, implementing a circular economy model for bag recycling and other such endeavours.

Emissions Intensity

Emissions per Unit of Production: Emissions intensity metrics provide insight into the efficiency of a brand's operations in relation to its production output. By reporting on emissions per unit of production, brands can demonstrate their progress in reducing the environmental impact of their manufacturing processes, even as they scale their operations.

Emissions per Revenue: This metric assesses the relationship between a company's emissions and its financial performance. It provides a perspective on how efficiently a company generates revenue relative to its carbon footprint. Reductions in emissions per revenue indicate that a brand is growing its business while simultaneously lowering its environmental impact, reflecting a sustainable growth model.

These metrics are critical components of the ESG reports published by fashion and luxury brands, offering a quantitative assessment of their efforts to mitigate climate change and reduce their overall environmental impact. By focusing on these key areas, companies can communicate their commitment to sustainability and their role in driving positive change within the industry.

Energy Metrics

Renewable Energy Usage

• Percentage of Energy from Renewable Sources: This metric measures the proportion of a company’s total energy consumption that comes from renewable sources such as solar, wind, or hydropower. Luxury brands are increasingly prioritising the use of renewable energy in their operations to reduce their reliance on fossil fuels and minimise their carbon footprint. ESG reports often highlight the percentage of energy sourced from renewables as a key indicator of their commitment to sustainable energy practices.
• Total Renewable Energy Consumed: In addition to the percentage, companies also report the total amount of renewable energy they consume. This provides a broader view of their energy usage patterns and the scale of their commitment to transitioning away from non-renewable energy sources. This metric is crucial for understanding the impact of renewable energy adoption on a company's overall energy strategy.

Energy Efficiency

• Energy Intensity Reduction: Energy intensity refers to the amount of energy consumed per unit of production or per revenue. Brands report on their progress in reducing energy intensity as a way to demonstrate improvements in energy efficiency. This metric reflects how effectively a company is using energy relative to its output, which is critical for sustainability.
• Energy Efficiency Initiatives: ESG reports often detail specific initiatives undertaken by companies to enhance energy efficiency. These might include upgrading to more efficient machinery, retrofitting facilities with energy-saving technologies, or optimising production processes. By showcasing these initiatives, companies can illustrate their proactive approach to reducing energy consumption and improving operational efficiency.

Total Energy Consumption

• Total Energy Consumed: This metric captures the overall energy consumption of a company across all its operations. It is a fundamental indicator of a company's energy use, providing a baseline for tracking progress in energy reduction and efficiency efforts over time. ESG reports typically disclose this figure to offer transparency about the company’s energy footprint.

Certifications

• LEED Certification: Leadership in Energy and Environmental Design (LEED) is a widely recognized certification for green buildings. Companies report on the number of their facilities that have achieved LEED certification, which signifies that they meet rigorous standards for energy efficiency, water conservation, and sustainable building practices. This certification is a strong indicator of a brand's commitment to creating environmentally responsible workspaces.
• Green Building Certification: Beyond LEED, other green building certifications may be mentioned in ESG reports, depending on the geographic location and specific standards applicable. These certifications reflect the company’s adherence to sustainable building practices and their efforts to minimise the environmental impact of their physical infrastructure.

These energy-related metrics are essential components of ESG reporting for fashion and luxury brands, providing insight into how these companies manage their energy consumption and their broader environmental impact. By focusing on renewable energy usage, energy efficiency, and certified sustainable buildings, brands can demonstrate their commitment to sustainability and responsible energy management.

Materials Metrics

Sustainable Materials Usage

• Percentage of Sustainable Materials in Products: This metric indicates the proportion of a brand's products that are made using sustainable materials, such as organic cotton, responsibly sourced wool, or other eco-friendly alternatives. Companies are increasingly focusing on incorporating sustainable materials into their product lines to reduce their environmental impact. ESG reports often highlight this percentage as a key indicator of a brand’s commitment to sustainability.
• Percentage of Recycled Materials in Products: Many luxury brands are incorporating recycled materials into their products to reduce waste and lower their reliance on virgin resources. This metric measures the extent to which recycled materials, such as recycled polyester or reclaimed fabrics, are used in the production of goods. By reporting on this percentage, companies demonstrate their efforts to promote a circular economy and minimise waste.

Packaging Materials

• *Percentage of Sustainable Packaging: *Sustainable packaging refers to packaging materials that are either recyclable, compostable, or made from renewable resources. Brands report on the percentage of their packaging that meets these criteria, reflecting their commitment to reducing the environmental impact of their product packaging. This metric is critical for assessing the sustainability of a company's supply chain and product lifecycle.
• Reduction in Plastic Packaging: With growing concerns about plastic pollution, many brands are actively working to reduce the amount of plastic used in their packaging. This metric tracks the progress made in decreasing plastic usage, either by replacing plastic with alternative materials or by minimising packaging overall. ESG reports often showcase these reductions as part of a broader strategy to address environmental concerns.

New Age Materials

• Use of Innovative Sustainable Materials: This metric focuses on the adoption of new, innovative materials that offer sustainable alternatives to traditional resources. Examples include lab-grown leather, biodegradable textiles, or plant-based alternatives to synthetic fibres. By incorporating these new age materials into their products, brands can differentiate themselves as leaders in sustainable innovation, driving the industry towards more environmentally friendly practices.

These metrics provide valuable insights into how fashion and luxury brands are addressing the environmental impacts of the materials they use. By focusing on sustainable and recycled materials, innovative alternatives, and more responsible packaging, companies can demonstrate their commitment to reducing their overall environmental footprint while promoting a more sustainable future for the industry.

Water and Waste Management Metrics

Water Consumption

• Total Water Used: This metric reflects the total amount of water consumed by a company across all its operations, including manufacturing, offices, and retail spaces. Tracking total water use is essential for understanding the environmental impact of a brand's operations and for setting goals to reduce water consumption.
• Water Use Efficiency: Water use efficiency measures how effectively a company uses water relative to its production or other activities. Brands report on initiatives to improve water use efficiency, such as installing water-saving technologies or optimising processes to reduce water wastage. This metric is crucial for demonstrating a brand's commitment to conserving water resources.
• Water Recycled/Reused: This metric tracks the amount or percentage of water that is recycled or reused within a company's operations. Recycling and reusing water reduces the demand for fresh water and minimises wastewater discharge, making it a key component of sustainable water management strategies.

Waste Management

• Waste Diverted from Landfill: This metric indicates the percentage of waste that is diverted from landfills through recycling, composting, or other waste management practices. Companies often set goals to increase this percentage as part of their efforts to reduce their environmental impact and move towards a circular economy.
• Zero Waste to Landfill: Achieving zero waste to landfill is a significant milestone in a company’s waste management strategy. This metric reflects the success of a company in ensuring that all waste is either recycled, composted, or otherwise diverted from landfill, thereby minimising its environmental footprint.

Supply Chain Metrics

Supply Chain Transparency

• Percentage of Tier-1 Suppliers Audited: This metric shows the proportion of a company's primary suppliers that have undergone audits to ensure compliance with the company's standards and policies. Auditing suppliers is crucial for maintaining transparency and ensuring that ethical and environmental standards are upheld throughout the supply chain.
• Supplier Compliance with Code of Conduct: This metric measures the level of compliance among suppliers with the company's code of conduct, which typically covers areas such as labour rights, environmental practices, and ethical sourcing. High compliance rates indicate a well-managed and responsible supply chain.
• Higg Index Scores for Facilities: The Higg Index is a tool that measures sustainability performance across the supply chain. Brands report on the scores achieved by their facilities and suppliers, providing insight into the environmental and social impacts of their operations.
• Vendor Code of Conduct Coverage: This metric reflects the percentage of vendors or suppliers that are covered by the company's code of conduct, ensuring that all partners adhere to the same high standards for ethics and sustainability.

Employee Benefits Metrics

Gender Diversity

• Percentage of Women Employees: This metric shows the proportion of women in the company's workforce. It is a key indicator of gender diversity and inclusion within the organisation, reflecting the company's commitment to creating an equitable work environment.
• Percentage of Women in Leadership Positions: This metric highlights the representation of women in leadership roles within the company. A higher percentage indicates progress towards gender equality in senior management and decision-making positions.

Human Rights

• Compliance with Human Rights Benchmarks: This metric measures how well the company complies with recognized human rights benchmarks, such as those set by international organisations or industry standards. It reflects the company's commitment to upholding human rights throughout its operations and supply chain.

Health and Safety

• *Workplace Safety Regulations: *This metric tracks the company's adherence to workplace safety regulations and standards. It includes measures such as accident rates, safety training programs, and the implementation of safety protocols, reflecting the company’s commitment to ensuring a safe working environment for all employees.

CSR (Corporate Social Responsibility) Activities Metrics

Community Investments

• Total Value of Community Investments: This metric quantifies the total financial contributions made by the company to community initiatives and charitable programs. It demonstrates the company’s commitment to giving back to society and supporting the communities in which it operates.
• Number of Beneficiaries from CSR Programs: This metric tracks the number of individuals or groups who benefit from the company's CSR activities, providing a tangible measure of the impact of the company's community investments.

Scoring Systems Metrics

External ESG Ratings

• Sustainalytics ESG Risk Rating: This rating assesses a company’s exposure to ESG risks and how well it manages those risks. A lower score indicates lower risk and better management, which is favourable for the company’s reputation and attractiveness to investors.
• CDP Climate Change Score: The CDP (Carbon Disclosure Project) Climate Change Score evaluates a company's efforts to manage its environmental impact, particularly in relation to climate change. A higher score reflects stronger environmental performance and transparency.
• S&P Global ESG Evaluation: This evaluation provides an overall assessment of a company’s ESG performance, combining insights into environmental, social, and governance factors. It is a comprehensive measure of the company’s sustainability and ethical practices.
• Dow Jones Sustainability Index (DJSI): The DJSI is a well-known index that tracks the sustainability performance of leading companies globally. Inclusion in the DJSI is a prestigious recognition of a company’s commitment to ESG principles and practices.

These metrics collectively provide a robust framework for evaluating the ESG performance of fashion and luxury brands. By focusing on areas such as water and waste management, supply chain transparency, employee benefits, CSR activities, and external ratings, companies can effectively communicate their sustainability achievements and challenges to stakeholders.

Analysis of Key ESG Reports

Luxury and fashion brands take diverse approaches in their ESG (Environmental, Social, and Governance) reporting, reflecting different priorities and levels of progress.

LVMH, for instance, focuses on long-term environmental goals through its LIFE 360 program, emphasising carbon reduction and supply chain transparency, with ambitions set for 2026 and 2030. Kering Group, known for its commitment to biodiversity, has undertaken initiatives in regenerative agriculture and other sustainable practices. Aeffe is still developing its sustainability framework but has made notable progress, such as reducing paper consumption.

Prada and Moncler are similarly committed to sustainability. Prada’s Re-Nylon project aims to replace virgin nylon with recycled alternatives by 2024, while Moncler became carbon neutral in 2021 and continues to reduce emissions and ensure sustainable sourcing. Ralph Lauren focuses on water conservation and waste management, particularly in denim production, while Valentino emphasises craftsmanship alongside responsible sourcing and supply chain audits.

In the sportswear industry, brands also take distinct ESG approaches. Adidas leads in using recycled materials and energy efficiency, with its Prime Green initiative reducing plastic waste. New Balance has made impressive strides in reducing emissions and prioritises renewable energy. Nike’s Move to Zero campaign aims for zero carbon and zero waste across its operations, while Puma focuses on water management and responsible sourcing, using the Higg Index for transparency in its supply chain.

While fast fashion brands report on similar key metrics such as emissions, water usage, and material sustainability, there are differences in focus. For example, Gap Inc. and Abercrombie & Fitch emphasise social metrics and gender equity, while Fast Retailing, H&M, and Inditex concentrate more on environmental sustainability and supply chain transparency. Inditex has set a goal of carbon neutrality by 2040, while H&M focuses on circular fashion and sustainable materials. Fast Retailing (Uniqlo) aims to use 50% recycled materials by 2030.

Luxury beauty companies also place different emphases on ESG metrics. Estée Lauder has made significant reductions in greenhouse gas emissions and focuses on sustainable packaging. L’Oréal aims for decarbonization, with specific targets for emission reductions and increased use of recycled packaging materials. Shiseido has achieved a 60% reduction in CO₂ emissions and focuses on sustainable packaging. Coty, Inc., though advanced in sustainable packaging goals, lags in reporting detailed water usage and biodiversity metrics.

The eyewear and watch industries are not left behind. EssilorLuxottica aims for carbon neutrality by 2030, with a focus on plastic waste reduction and water management. Safilo emphasises emissions reduction and sustainable materials but has room for improvement in water and waste metrics. Marcolin focuses on diversity and inclusion, while Swatch Group balances environmental and social metrics but lacks detailed data on water and waste management.

Luxury, fashion, sportswear, and beauty brands are committed to sustainability, however, their ESG reporting reflects different areas of focus and progress, showing the varying maturity levels of these companies in addressing environmental and social responsibilities.

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Environmental, Social, and Governance (ESG) Reporting on Sustainability Efforts in the Luxury Fashion Industry

Article on Analysis of ESG reports by Louis Vuitton, Gucci, Valentino, Prada, Hugo Boss, Ralph Lauren and other luxury brands

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