Jul 25, 2024
Dior bags are a symbol of luxury and high craftsmanship. However, practice of the famous brand, owned by the LVMH group, which also published its 2022 Social and Environmental Responsibility Report...
Dior bags are a symbol of luxury and high craftsmanship. However, practice of the famous brand, owned by the LVMH group, which also published its 2022 Social and Environmental Responsibility Report (more information here), seems to be inconsistent with LVMH principles.
After an investigation by the Milan Public Prosecutor's Office, it was revealed that Chinese-owned companies in Italy were supplying and producing luxury products for Dior. The brand was selling the bags for $2,780 while the production costs were estimated at $57. The workforce worked under inhumane conditions, with no measures for their life and health safety and of course without receiving the pay they deserved for their hard work. It turns out that this was standard practice of the luxury brand and not an isolated incident. The outcome was that Dior was sentenced to one year of judicial administration, with a verdict of exploitation and violation of labor laws. The Italian Competition Authority (AGCM),in turn conducted a separate investigation regarding alleged unfair commercial practices on the part of Dior, due precisely to the illegal conditions prevailing in the workshops that supplied those bags (for more on the Dior case click here and here).
These practices also contradict the requirements of the Directive (EU) 2022/2464 of the EUROPEAN PARLIAMENT AND OF THE COUNCIL of 14 December 2022 on corporate sustainability reporting or Corporate Sustainability Reporting Directive (CSRD) (more here). The Directive applies to almost 50,000 companies, which will be required to submit sustainability reports in accordance with the European Sustainability Reporting Standard (ESRS). Reporting will not only address the risks that companies face from climate change but also the impacts they may cause on the climate and society, particularly in terms of safeguarding human rights. On 7 February 2024, the Council and the European Parliament reached a provisional agreement on a Directive concerning deadlines for the adoption of sustainability reporting standards for certain sectors and for certain third country companies, amending the Directive on corporate sustainability reporting (CSRD).
The first ESRS standard was adopted on 31 July 2023 and issued on 22 December 2023 and does not apply to a specific sector (sector agnostic), but to all companies falling under the CSRD. All these new standards were scheduled for 30 June 2024.
The directive agreed on 7 February 2024 by the Council and the European Parliament postponed the adoption of the new ESRS standards until 30 June 2026. This deferral will allow companies to focus on implementing the first set of ESRS standards and more time to develop sector-specific sustainability standards, as well as standards for specific non-EU country companies. The implementation date for third country companies will remain fiscal year 2028, as provided for in the CSRD Directive.
In conclusion, although the European Union is making significant steps in the area of sustainability and corporate compliance, breaches of Directive (EU) 2022/2464 have recently been observed not only in fast-fashion companies, but also in luxury fashion houses. For this reason, companies should consider practices and methods that comply with the above directive, without violating people's rights and without having a serious impact on the environment and society.
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