High-end consumers are increasingly turning their attention to ethically produced products and are willing to pay a premium for these goods. However, the luxury industry has a chequered history of sustainability. Dr Navdeep Athwal, Lecturer of Marketing, University of Sheffield, UK believes that blockchain could help brands bolster their ethical supply chain conundrum and provide the elusive solution that brands are looking for
Due to a lack of transparency in the supply chain and accusations of animal and worker exploitation, luxury brands have a controversial relationship with sustainability. Increasingly, we are seeing some of the industry’s most significant consumer groups – Millennials and Chinese consumers – seeking products that are both sourced sustainably and produced ethically. This is a huge obstacle for luxury brands who need to find innovative ways of tightening up control on their supply chains and provide convincing evidence to savvy consumers that they are stepping up to the plate and making a genuine change in their organisations.
There is scepticism around Blockchain, it may well be the solution to providing traceability in across the luxury sector. The most well-known application for Blockchain is within the financial industry; crypto-currency referred to as Bitcoin. The 2008 global financial crisis revealed that it is often difficult to identify the correct owner of an asset, particularly in long chains of changing buyers in global financial transactions. However, this problem of tracing back ownership in long transaction chains is not limited to the financial transaction, but can also be problematic across a range of sectors.
Blockchain was founded on the ideals of security and transparency. The technology promises data authenticity through the use of advanced encryption and data validation algorithms. Using this powerful technology could give rise to a new generation of luxury sustainability monitoring, traceability and reporting – the key for brands prioritising supply chain transparency.
A new level of ‘technological trust’ is developed across organisations as once a transaction is agreed, it cannot be changed or deleted. This stems from the notion that everyone on the blockchain can see the chain of ownership for an asset on the system.
Each step of a product’s journey – from source to store -can be logged thereby creating an electronic decentralised ledger. With open access to this information, customers could read about a product’s provenance and verify its green credentials. This technology is attractive to major brands as it could solve the issue of counterfeiting, again by tracking each link in the supply chain.
In the luxury and fine jewellery sector, De Beers is one of the first to implement the technology to track its diamonds from source to point of sale. This sector has been plagued with accusations of “conflict” or “blood” diamonds, and the use of blockchain aims to assure consumers of De Beers’ values of environmental stewardship and provenance.
I understand Blockchain might not be the first technology that comes to mind when considering sustainability, however, I believe that this technology can improve the visibility of supply chains within the luxury industry, in turn driving forward sustainability”.
Beyond, the luxury sector, BHP, the world’s largest mining firm announced that it would use blockchain to track and record mining practices with vendors and partners. While this responds to the increasing demands from BHP stakeholders for responsible mining practices, it has also increased internal efficiency and effective communications with its vendors and partners. Such benefits may also be applicable in the luxury sector.
Traceability in the luxury supply chain is just one aspect of how embracing the digital revolution could change the industry. Further research conducted by me explores sustainable luxury and how Blockchain can be utilised in this context in more detail. Many luxury powerhouses, such as LVMH and Kering, employ sustainability as a key strategic priority and have the ability to implement large-scale change such as using Blockchain to promote transparency.
Luxury shoppers have long been engaging in eco-conscious mindful buying behaviours, and the development of CSR initiatives by luxury organisations like LVMH; owners of Louis Vuitton may well see the adoption for blockchain technology not just to eliminate the problem of counterfeiting, but also to create transparent environmentally friendly supply chains.