Luxury’s Sustainable Future: A Radical Rethink is Required
The luxury sector, historically defined by rarity, craftsmanship, and aspiration, is confronting a critical challenge: maintaining its value proposition while minimizing its impact on the planet and its people. A new report, “Business models for sustainable luxury,” from Square Management consultancy, delves into this transformation, analyzing how luxury business models must evolve within the constraints of planetary boundaries.
The study identifies luxury as uniquely positioned to lead the ecological transition. With a global market value of 364 billion euros in 2024 and significant cultural influence, the sector has the power to shape broader trends within the creative industries. However, this influence is occurring amidst increasing pressures, including dwindling raw material supplies (like gold, leather, and cashmere), stricter regulations (such as the CSRD directive, the AGEC law, and the Green Deal), the growing importance of ESG criteria in financial assessments, changing consumer expectations, and evolving societal norms surrounding consumption.
The report argues that incremental changes are insufficient and calls for a fundamental overhaul of luxury business models. To guide this shift, the study utilizes the circular economy’s “9Rs” framework, which categorizes sustainability strategies based on their transformative potential, ranging from basic recycling to questioning the necessity of production itself.
Currently, a spectrum of models are being implemented. Lower-impact strategies include waste-to-energy conversion (Recover) and raw material recycling (Recycle), exemplified by initiatives like Guerlain’s refillable bottles and Prada’s Re-Nylon line. More substantial approaches involve upcycling (Repurpose, Remanufacture, Refurbish), transforming unsold inventory and dormant materials into desirable items – a strategy embraced by brands like Balenciaga, Jean Paul Gaultier, Coach, and Jeanne Friot, blending circularity with creativity and compelling storytelling.
Repair is highlighted as a vital component, extending product lifecycles and avoiding the most environmentally damaging stages of production. Luxury houses such as Hermès, Chanel, and Cartier are integrating repair services into their client relationships, while platforms like Tilli are scaling these services. Re-use and rental markets are also expanding rapidly, particularly among younger consumers; a BCG-Altagamma report ("True-Luxury Global Consumer Insights," 2023) indicates that 65% of luxury consumers are interested in purchasing pre-owned items, a percentage that continues to rise.
The most impactful models focus on reducing production volume, encompassing Reduce, Refuse (avoiding unnecessary purchases), and Rethink. On-demand manufacturing, pre-order systems, and limited-edition releases, as practiced by Gabriela Hearst and MaisonCléo, minimize unsold stock while enhancing exclusivity. Some brands are even adopting regenerative practices, such as Kering’s investment in regenerative agriculture and Chloé’s commitment to embedding social and environmental impact into every product.
However, the report acknowledges significant obstacles to these transformations. Internal challenges include complex logistics, high costs, resistance to change, and a deeply ingrained cultural preference for ownership. To overcome these hurdles, the authors emphasize the importance of enhanced traceability (leveraging technologies like blockchain), collaborative efforts between companies to share costs, and, crucially, reframing sustainable luxury as a new symbol of prestige, rather than a sacrifice.
The study concludes that luxury must move beyond simply “doing less harm” and actively create positive, measurable, and shared value that aligns with planetary boundaries. This necessitates a profound redefinition of desirability itself, signaling a fundamental shift in the core principles of the luxury sector.
