In 2012, when Jean-Noël Kapferer and Vincent Bastien published the second edition of “The Luxury Strategy,” their much-admired, rule-breaking guide to building luxury brands, they devoted the final chapter to sustainability.
“Luxury acts but does not speak,” they wrote. “Its business is creativity, not bragging about its efforts in sustainable development. Luxury is like a theater: work behind the scenes is secret.”
Of course, that was 10 years ago.
Today, luxury companies are grappling with increasing pressure from activists, investors and consumers to disclose their sustainability efforts, including the sources of their raw materials and how their products’ journey to market has affected people and the planet.
Indeed, soon most large companies doing business in the EU, whether listed or privately held, will no longer have a choice to provide this information. And among them will be many of the major players in the secret world of high-end watchmaking.
This week, the European Parliament is expected to approve the Corporate Sustainability Reporting Directive, a far-reaching piece of legislation designed to bring sustainability reporting on par with financial reporting. Targeting companies that meet two of the following three criteria – 250 or more employees, net sales of at least 40 million euros ($39.4 million) and total assets of 20 million euros or more – the directive would force many luxury watchmakers to document their supply chains , in some cases for the first time.
“Maybe the watch industry is a bit conservative or not fully aware, but they’re going to get a wake-up call, there’s no getting around it,” Paul Roeland, a data and sustainability reporting expert with the Clean Clothes Campaign in Amsterdam, said on a recent video call.
“To say, ‘We bought the gold at an auction in Dubai and we don’t know where it came from’ will not be acceptable,” Mr. Roland said. “The same goes for diamonds.”
Companies will be penalized for not complying with the reporting requirements, which will take effect as early as 2025 (based on fiscal year 2024 reports). In the most extreme cases, such companies can be banned from selling their products in the EU.
“If there’s a credible allegation of forced labor somewhere in the supply chain, a company has two weeks to prove it didn’t happen, which means if you haven’t mapped your supply chain, you won’t do it in two weeks “Sir. Roland said. “If companies now say, ‘It’s not our problem,’ then it will be.”
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Organizations that have reported on the watch industry’s human rights record emphasized the importance of transparency in a company’s overall sustainability efforts, particularly regarding raw materials such as gold and diamonds.
“Reporting is one of the most powerful ways to build trust among stakeholders,” Aruna Kashyap, associate director of the economic justice and rights division at Human Rights Watch in London, said in a recent phone call.
“But reporting itself is only going to change so much,” said Ms. Kashyap added. “It’s the process of being able to collect data, scrutinize the data and see what it shows about the business that can provide insight to management.”
Too many early leaders are challenging the industry’s long-standing position culture of silence is part of a wider recognition that sustainability management has become a top priority.
“Sustainability was not part of our language three years ago,” Jean-Marc Pontroué, chief executive of Panerai, said in a recent phone call. “Today, if we want to be credible with our stakeholders, with our communities, with our partners at UNESCO, we have to provide numbers. Good intentions, nobody cares.”
Yet plenty of watchmakers, many of whom belong to large conglomerates that centralize operations such as gold sourcing, have only just begun to scrutinize their suppliers. Iris Van der Veken, CEO of Watch and jewelery initiative 2030a campaign open to all jewelery and watch companies willing to commit to an ambitious set of environmental and social responsibility targets, said one of the biggest obstacles to transparency was the complex nature of most watchmakers’ supply chains.
“Understanding your supply chain takes time and is a process of continuous improvement,” said Ms. Van der Veken wrote in an email.
“The more players ask questions about their supply chains and sourcing/material provenance, etc., the better the reporting,” she wrote. “I see an accelerated movement driven by the brands. It’s very encouraging.”
So far, however, only a handful of watchmakers have made significant progress in revealing the origins of their raw materials.
At the end of October, for example, Breitling released its second annual sustainability reportwhere the brand detailed the sources of the gold and diamonds that went into making what it called its first “traceable” watch, the Super Chronomat Automatic 39 Origins.
The report specified where Breitling got the gold: the Touchstone mine in Colombia, a small operation that meets the criteria of the Swiss Better Gold Association, a nonprofit that promotes responsible gold from artisanal and small-scale miners. And it named the Swiss refineries (MKS PAMP and Argor-Heraeus) where that gold was processed.
The company also identified the source of the lab-grown diamonds lining the bezel of the watch: FenixDiamonds, a New York-based company with a factory in Gujarat, the epicenter of India’s diamond-cutting industry.
Aurelia Figueroa, Breitling’s global head of sustainability, said the company first disclosed its gold suppliers, as well as the amount of gold it bought from them, in its 2021 sustainability report, and that it felt “instant”.
“It was one of the many points of our journey,” said Ms. Figueroa said on a recent video call. “That’s what we’re going to do. We’re going to talk openly about it.”
However, most watchmakers have not been so open. Of the dozen watch brands contacted for this article, including Audemars Piguet, Cartier, IWC, Rolex and Patek Philippe, most did not respond to questions about what changes the new regulation would require at their companies, declined to be interviewed or asked available outside – journal statements. Breitling was the only brand to name its suppliers.
For consumers eager for assurances that the luxury watches they buy are not adorned with materials mined in conflict zones, the war in Ukraine has added an unforeseen urgency to the Swiss watch industry’s transparency initiatives because Russia is the world’s largest supplier of small diamonds and the second largest supplier of gold after China.
“The war has certainly brought these difficult issues to the fore,” Juliane Kippenberg, a Berlin-based mineral supply chain expert at Human Rights Watch, said in a recent phone call. “It has shown that all these places are totally dependent on each other, and when a jeweler makes a piece of jewelry or a watchmaker makes a watch, they cannot ignore what is happening in the supply chain and whether they are contributing to abuse.
“But it hasn’t solved the problem or made people be completely transparent,” she added.
Some watchmakers say they hope the technology can help them. In April 2021, a cohort of luxury brands including LVMH Moët Hennessy Louis Vuitton, Prada Group and Cartier, joined together to create Aura Blockchain Consortium, a nonprofit association of 30 member brands exploring how blockchain technology can be used to, among other things, shed light on their supply chains.
Daniela Ott, the consortium’s general secretary, said the technology enabled brands to enter data from the beginning of their supply chain – for example, a diamond mine – all the way to the finished product.
Mrs. Ott wrote in an email. “Thanks to this traceability, brands can be more transparent with their customers and improve their storytelling back to the diamond’s origin.”
But when it comes to sustainability data, it’s not just customers that brands have to worry about.
“There is already widespread recognition that companies’ sustainability reporting is increasingly becoming a prerequisite for accessing loans or investments or public funds for transformational activities,” wrote Susanna Arus, communications and EU public affairs manager at the Brussels-based based law firm Frank Bold. an email.
At Vontobel, a private banking and investment management group based in Zurich, a company’s ESG (environmental, social and governance) efforts factor into value.
Jean-Philippe Bertschy, a luxury goods analyst at the firm, said that over the next five years, sustainability reporting will likely become second nature to many companies, even those that have made no progress in that direction.
“The pressure is enormous,” Mr. Bertschy said in a recent phone call.
“Right now you have some companies disclosing their carbon emissions, but it’s just a number, a self-declaration,” he added. “When you have auditors checking what they’re doing, things will change.”