The luxury goods industry did not escape the economic hardships that came with the pandemic. Indeed, the Covid-19 crisis led to an unprecedented decline in the market’s size, with a 23% drop since 2019, representing a return to its 2014 levels. Today, the luxury sector has regained pre-Covid growth levels. Indeed, according to the Luxury 2022 report “Rerouting the Future”, the sector is currently worth an estimated €288 billion, which is precisely the same level as in 2019. However, many sources predict a decrease in its growth for 2023. This is one of the many factors leading to the shift towards sustainable luxury.

Indeed, among the growth levers used to overcome the crisis, one of the most promising ones has been innovation in terms of sustainability. According to an IFOP study, since the pandemic, 25% of consumers expect brands to take action when it comes to the environment. Leading luxury brands are aware of this fact and are increasingly collaborating with startups to move towards more sustainable practices.

This article explores the various solutions offered by the startup ecosystem to support the luxury industry in its quest for sustainability.

More transparency

Major luxury brands want to join the slow-luxury trend, aiming to be totally transparent about their production processes. Hélène Valade, Director of Sustainable Development at LVMH, stated that the group “is working to strengthen product traceability at all levels of the supply chain”. She mentioned the possibility of using an application to ensure this transparency.

Many startups have committed to increasing transparency, reducing environmental impacts, and improving working conditions. As such, numerous traceability and impact measurement tools, dedicated to the luxury industry, have emerged. For example, Made2Flow has developed a data collection and analytics software specialised in monitoring the luxury and fashion industry. The startup allows brands to be more transparent and to make more informed choices for their supply chain. Blockchain technology also answers this need. Indeed, it improves the traceability of objects throughout their life cycle by issuing certificates of authenticity at any stage of the production process.

Secondhand goods

It comes as no surprise that second-hand goods are a big part of sustainable luxury. Indeed, this trendy market is growing four times faster than first-hand luxury and was worth €33 billion in 2021. While the main driver of this growth is affordability, 52% of consumers turn to second-hand luxury to reduce their environmental impact, according to a study led by Adot and CMI Media. Major brands are quick to incorporate this into their strategy, as illustrated by Galeries Lafayette Haussmann. In September 2021, a 500-square-metre facility, called “(Re)-Store”, was deployed in the Galeries to welcome young brands that advocate circular fashion and second-hand luxury sales.

In addition to marketplaces dedicated to second-hand luxury goods, startups are also helping brands launch their own second-hand offers. One example is the startup Reflaunt, which co-develops second-hand sales platforms for major luxury brands such as Ganni, Alex Arigato, Net-à-porter and Balenciaga.

Material recycling

Today, only 1% of fashion products are recycled. This contradicts the values of the luxury sector, which claims that its products are of high quality and should therefore be recyclable. However, there is growing awareness of this issue. Hermès led the way with Petit H, a line of objects made from recycled raw materials.

Startups are providing many solutions in this respect. Several digital solutions allow brands to collect and recycle their customers’ textiles more easily. Others, such as Authentic Material, a member of La Maison des Startups by LVMH, recycle noble materials that would otherwise be destroyed into high quality materials. Luxury houses can then reintegrate these materials into their supply chain, thus reinforcing their eco-friendly approach.

Upcycling of unsold goods

Besides the recycling of materials, the entirety of a product can sometimes be reused. However, several million euros of unsold goods are destroyed each year. In light of this, France introduced the Anti-waste Law on February 10, 2020. It states, among other things, that the destruction of unsold goods will be prohibited by 2022. This measure is widely supported by NGOs and activists, who are calling on the European Commission to extend it to the European market. Belgium and Germany have already followed the lead by implementing similar laws.

To help leading luxury brands comply with these new regulations, the startup ecosystem is pushing new solutions. For example, Uptrade, Resortec and WeTurn transform unsold textiles into upcycled raw materials. This could lead to new sustainable initiatives, such as the upcycled collections that came from designers like John Galliano at Maison Margiela and Virgil Abloh at Louis Vuitton.

Innovative materials

Recycling and upcycling have become challenges as the raw materials used in luxury goods grow scarcer. On the other hand, regulations on the use of natural resources and animal husbandry are becoming increasingly strict. This is resulting in the emergence of new and innovative materials.

New materials are among the trends with the most innovative solutions when it comes to sustainable luxury. Leather, cotton, wood, metals, fibres, plastics – all types of materials are covered. Among the most promising startups offering solutions, we can mention:

• Biophilica, which creates a leather made of “green” waste

• Desserto, which elaborates a vegan leather from cactus

• Ictyos, which makes leather from recycled fish skin

• Daumet, which has managed to design gold alloys that guarantee a more efficient and cost-effective use of precious metals

• Fili Pari, a startup rated by Early Metrics, which collects powders generated by the marble industry and transforms them into a strong, waterproof fibre for textiles.

Reducing CO2 emissions

The textile industry alone accounts for 1.7 billion tonnes of CO2 emissions per year. Although luxury goods represent a minor part of the fashion industry, the sector must commit to transforming the way it operates. Chanel, for example, has announced that it will reduce its CO2 emissions by 50% by 2030. Kering is taking it one step further by committing to fully offsetting the greenhouse gas emissions generated by all of its operations, notably through forest protection programmes.

To help them, many startups are developing solutions that allow companies to measure and reduce their carbon footprint. Some of them are even specialised in the fashion industry, such as Fairly Made, which is among the top 20% of startups rated by Early Metrics. The startup allows brands to collect and record data on their suppliers. Fairly Made’s application combines the data and provides a compliance score. Using a QR code or widgets provided by the startup, brands can then share the impact of their products with their consumers.

Social impact

According to a BCG study, 64% of future luxury consumers from Gen Z are seeking to buy from companies committed to environmental and social causes. Understanding the need to question their methods, luxury brands are working to increase their expertise in areas such as diversity and inclusion. Indeed, Prada recently named its first Chief Diversity Officer following a scandal that prompted the New York Human Rights Commission to investigate the company’s diversity and inclusion practices.

Recognising the importance of strengthening their social impact, luxury brands are keeping a close eye on startups dedicated to social causes. For instance, EachOne won the LVMH Innovation Awards for its inclusive recruitment project. This startup identifies and trains refugees and newcomers to a country based on a client’s needs. The client, in turn, benefits from a unique inclusion experience.

In conclusion, the major players in the luxury industry are willing to change their methods and processes to become more eco-friendly and committed. Startups are a very efficient vehicle to achieve this goal. Indeed, partnerships, acquisitions and investments show that we are slowly moving towards more sustainable luxury. As an example, the funds raised by luxury startups in 2021 were 30% higher in value than in 2020. Today, the luxury industry is seeking to transform ecological constraints into opportunity. By combining their efforts, startups and leading luxury brands should be able to drastically reduce the sector’s impact on the environment.

Article written by Mathis Ferrand, VC Scout at Early Metrics, and translated by Mahaut Chappot de la Chanonie.