Desire still beats sustainability for now

The luxury industry used to be dominated by conservative consumers who put prestige before responsibilities to the environment, but new consumers such as Millennials and Generation Z may be about to change that.

09/28/2022


Photo: Marten Bjork and Freestocks

There was a time in the not-too-distant past where the luxury industry did not have the best reputation regarding sustainability practices. As American megatrends and sustainability expert Andrew Winston wrote five years ago in the Harvard Business Review:

“With a few exceptions, it’s been an industry not traditionally associated with concerns about environmental impacts, human rights, and wellness, even while those trends have been sweeping through the mainstream consumer products sector.”

Fast forward to today, and sustainability has become a ubiquitous topic across most industries—and the luxury industry is no exception. While the luxury industry often is associated with words like excessive consumerism and guilty pleasures, the luxury industry has changed in the post-COVID world.

Many consumers in the luxury industry are concerned about the environment, sustainability, and governance. “We see,” explains Adam Lindgreen, Professor at Copenhagen Business School, “that many luxury companies therefore are adopting a sustainable approach, both environmentally and socially. Brands have had to accept that modern day luxury has its responsibilities to the environment and to the wider community.”

Every third luxury consumer seeks ethical luxury

However, not all luxury consumers seem to care about luxury sustainability. A recent joint research article ´Luxury Ethical Consumers – who are they?’ from Copenhagen Business School and Edhec Business School (France) found that just 30 to 40 percent of luxury consumers now seek ethical luxury and view ethicality as an important purchase determinant.

According to luxury lifestyle magazine Luxe Digital, Millennials and Generation Z consumers are driving 85 percent of global luxury sales growth, and their expectation for luxury brands to be aligned with their values becomes increasingly important.

So how will the future look for this consumer sector? With Millennials and Generation Z driving this demand, how can luxury goods and services embrace this change and build sustainable luxury into their narrative?

Definition of a luxury ethical consumer

According to Joëlle Vanhamme, Professor at Edhec Business School who coauthored the research article together with Adam Lindgreen and Gülen Sarial-Abi, also Professor at Copenhagen Business School, people engage in luxury consumption due to their desire for status.

Joëlle Vanhamme notes that luxury consumers purchase products and services with a price that exceeds functional values. These consumers purchase products and services with features perceived as truly exceptional in that the products and services offer prestige, price, rarity, quality, natural materials, and/or craftsmanship.

In contrast, she suggests ethical luxury consumers combine ethical criteria (e.g., manufacturing causes minimal harm to humans, animals, or the natural environment) with the criteria they would apply to any luxury consumptions (i.e., prestige, price, rarity, quality, natural materials, and/or craftsmanship).

“In other words, ethical luxury refers to design, production, and consumption that seek to remedy previous faults in the luxury industry, including environmental damage, human exploitation, and animal cruelty,” explains Professor Vanhamme.

Can luxury and sustainability be compatible?

According to Professor Lindgreen, there are contrasting views and findings regarding the compatibility of luxury consumption and ethical luxury consumption.

He believes that some researchers would argue that prestige, price, and perceptions of quality remain primary choice criteria for luxury consumption, and the inclusion of recycled materials in luxury fashion products, for example, may diminish the perceived value of products and services. “That is,” Professor Lindgreen explains, “some luxury products and services may appear less luxurious and desirable if they are labeled as sustainable.”
 
Other researchers, in contrast, he suggests, could argue that luxury consumption and ethical luxury consumption are compatible in the presence of certain conditions, such as rarity or timelessness. For example, luxury can be associated with ethicality and sustainability because luxury involves skills, endurance, and quality.

“Specifically, in our research article on luxury ethical consumers, we argue that despite the essential challenge to the ethicality of large luxury companies (i.e., these companies de facto impose a burden on the environment), luxury companies can and should pursue ethicality, as it also can help increase consumer loyalty,” says Professor Lindgreen.

Luxury ethical consumers – who are they?

Professors Vanhamme, Lindgreen, and Sarial-Abi sampled 706 American luxury consumers – the average age was approximately 46 years – to find out how engaged they were in sustainable luxury consumption.

They found there were five different consumer personas differing in age, ethicality, human values, purchase motivations, and assumptions about the world.

“Our research provides specific strategic opportunities for luxury companies for older demographic consumers who have not always had the opportunity of an ethical luxury choice. We argue that they should adopt different positioning strategies for various products and services within their portfolios and consider different business models to serve each of these individual consumer personas,” says Professor Sarial-Abi.

The different consumer personas

Sarah  Caroline  Ashley  Gail Tom
Light consumers of ethical products and of ethical luxury Heavy consumers of ethical products, light consumers of ethical luxury Moderate consumers of ethical products and ethical luxury Heavy consumers of ethical products and ethical luxury  Heaviest consumers of ethical products and ethical luxury
50 years old
Still working or retired
Children left home
54 years old
Still working or retired
Children left home
45 years old
Still working
No children
44 years old
Still working
No children
41 years old
Still working
Lives in cities
Children still at home

Sarah & Caroline typically are women, Tom typical man. Ashley & Gail are split between possibly being women or men.

For luxury companies attracting consumers like Gail and Tom, they need to highlight the quality of their offerings, but also their efforts to contribute to social economic and ecological issues.

Sarah and Ashley could be nudged into doing the right thing if there were rental solutions that enabled them to consume ethical luxury at a lower price and to help them consume luxury in a sustainable way.

For Caroline to buy into sustainable luxury, an alternative business model could be introduced such as second-hand luxury goods, which would fit these consumers’ values and desire for a better world.

The big trends

“If luxury companies can help consumers make more conscious purchase choices and change the way consumers think about how goods and services are provided, such companies even might cultivate greater brand loyalty by aligning their values with those of their ideal consumers,” says Professor Vanhamme.

“Rental solutions and second-hand luxury markets could be possible answers addressing the way consumers think about how goods and services are provided while at the same time as addressing sustainable issues,” adds Professor Sarial-Abi.

“The longer-term, sustainable strategy for the luxury sector could be to replace non-ethical luxury purchases with ethical versions, without increasing the total number of purchases, potentially through a long-term, corporate strategy of continuing education and campaigning and activism on ethical issues, as well as adaptions of alternative business models that are more sustainable,” concludes Professor Lindgreen.

To read the research paper, click here

Find out more about the researchers:

Adam Lindgreen

Joëlle Vanhamme

Gülen Sarial Abi


By Richard Steed 

The page was last edited by: Sekretariat for Ledelse og Kommunikation // 10/10/2022