Christian Dior Under Investigation Due to Labour Exploitation

[JohannesL]

Raids Find Luxury Handbags Being Made by Exploited Workers in Italy​

Raids Find Luxury Handbags Being Made by Exploited Workers in Italy© Italian Carabinieri/Associated Press
Aseries of raids in Italy has exposed the contrast between the glamorous world of Milan’s catwalks and some of the realities of luxury-goods production.

An investigation by Milan prosecutors into working conditions at local factories found workshops making handbags and other leather goods for Dior and Armani used exploited foreign labor to produce the high-end products at a fraction of their retail price.



Dior paid a supplier €53 apiece, roughly $57, to assemble a handbag that it sells in stores for €2,600, or about $2,780, according to documents examined as part of the probe. Armani bags, meanwhile, were sold to a supplier for €93, then resold to Armani for €250, and ultimately priced at around €1,800 in stores, the probe found. The cost prices don’t include leather or other raw materials. The companies separately cover the costs of design, distribution and marketing.

Some of the raided workshops, all of which were in Italy, were also making products for other fashion brands, prosecutors said.

“Why does it cost so little to manufacture the product?” said Fabio Roia, president of Milan’s court system, which has overseen the probe. “The brands need to ask themselves this question.”

Raids Find Luxury Handbags Being Made by Exploited Workers in Italy© Veejay Villafranca/Bloomberg News
Court rulings stemming from the investigation criticized the luxury companies for failing to adequately oversee their supply chains. The companies don’t face charges related to these findings. Some of the independently owned suppliers, however, could face charges for worker exploitation and employing workers without proper documentation.

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Gravitas: Dior, Armani face labour exploitation probe | The true cost of luxury


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Dior, owned by luxury giant LVMH, declined to comment. The brand recently submitted a memorandum outlining measures to resolve issues in its supply chain, court documents show.

Armani said it had “control and prevention measures in place to minimize abuses in the supply chain,” and that it was “collaborating with the utmost transparency” with authorities.

The Italian investigation highlights a distinctly modern issue in the luxury industry. While other sectors have moved manufacturing to China and other low-wage countries, many luxury brands kept production closer to home, believing it was crucial to their appeal. But despite being stamped with the “Made in Italy” label, prosecutors allege that some luxury goods are made by foreign workers, many of whom are Chinese, under conditions that fall far short of legal standards.

The probe comes as many aspirational shoppers—who have driven a luxury boom in recent years—cool spending on high-end products, deterred by a tougher economic environment and rising prices.



Luxury goods are able to command high price tags in part because of an expectation that they are made by skilled workers in artisanal workshops. In reality, while brands keep product design and development in-house, they often outsource production to suppliers.

Much of that happens in Italy, which is home to thousands of small manufacturers and produces some 50% to 55% of the world’s luxury clothing and leather goods, according to consulting firm Bain.

In recent years, many luxury brands have worked to better control their supply chain to mitigate reputational risk, control quality and abide by new European regulations intended to curb the fashion industry’s impact on the environment. One challenge is that suppliers often contract work to third parties, who sometimes subcontract themselves.

As a result of the Italian investigation, judges in June placed Manufactures Dior SRL—a unit of Dior—under so-called court administration after ruling that its supply chain included Chinese-owned firms in Italy that mistreated migrant workers. The same measure was taken against Armani in April and Alviero Martini, known for its map-print bags and other items, in January.

Raids Find Luxury Handbags Being Made by Exploited Workers in Italy© Fotogramma/Zuma Press
Court administration is a legal provision originally intended as a way to monitor companies infiltrated by organized crime groups. Under the process, special commissioners are appointed to oversee operations and provide updates to the court on a company’s progress on resolving issues.



Alviero Martini said it was “surprised and disturbed” to learn the findings of the probe, and that two of more than 40 suppliers had illegitimately outsourced parts of the production to third parties without its knowledge.

The company said that its production chain is vast and fragmented, as is typical of the sector, making it a challenge to directly control.

The court ruling related to Dior focused on four Milan-area companies in Dior’s supply chain, two of which directly supplied the brand. The workshops producing the goods employed dozens of workers, including at least two illegal immigrants and seven who were employed off the books, prosecutors said.

Raids Find Luxury Handbags Being Made by Exploited Workers in Italy© Italian Carabinieri/Associated Press
Inspections by Italian police in March and April found workers subject to “hygiene and health conditions that are below the minimum required by an ethical approach,” the judges wrote in a 34-page court order.

Workers often operated machines from which safety devices had been removed to increase productivity, compromising safety, prosecutors said. Workers also lived, ate and slept at the workshop. Electricity consumption data indicated that employees typically worked from dawn until after 9 p.m., including on weekends and holidays.


When investigators arrived at one facility, prosecutors said three off-the-books workers attempted to escape by climbing over a fence. They were quickly apprehended. At that workshop and at others, investigators examined documents showing the price brands paid suppliers for each product made.

The court ruling against Armani lays out how one of its subsidiaries, GA Operations, hired two subcontractors, which in turn hired a number of Chinese-owned subcontractors in Italy. Investigators interviewed workers who said they were paid as little as €2-€3 an hour to work long days. That wage is far lower than the level stipulated by the collective bargaining agreement covering the sector, the court ruling said.

Fabio Becheri, a marketing executive who previously worked at Gucci and its owner Kering for almost 20 years, said consumers are increasingly well-informed, and that the use of allegedly unethical labor practices to make a high-end item could be a turn off for them.


“The customer expectation is really high, especially when you are increasing the price so aggressively,” Becheri said.

Roia, the president of Milan’s court system, said he is working on a proposed program for fashion brands to beef up checks on suppliers.

“They have to be responsible for the entire chain,” Roia said. “That’s the only way we can stop this system that leads to the exploitation of workers.”

Write to Nick Kostov at [email protected]

source: www.wsj.com/

 

[kasper!]

My friend who worked in the Parisian trunk factory of LV in 2021, only earned around €1800 per month. The average pay check of these workers in Italy are around €3000-€4000 ( Most of them are Chinese or South East Asian like Vietnamese) but of course the workload is double or even triple...

LVMH pays very very little to their manufacture labour. I don't know about Kering. Richemont....it is another story. Those Swiss watchmakers....

 

[JohannesL]

My friend who worked in the Parisian trunk factory of LV in 2021, only earned around €1800 per month. The average pay check of these workers in Italy are around €3000-€4000 ( Most of them are Chinese or South East Asian like Vietnamese) but of course the workload is double or even triple...

I cannot blame them for that. Compared to Europeans who can have more leverage through labor unions, they get used to work extremely long hours to earn a decent paycheck in their countries where overload is the common practice not only for domestic companies but also multinational corporations. I can say that the majority of the labor force in those countries have no idea of how to negotiate through collective bargaining due to absence of real labor union (don't trust their governments' propaganda) in their histories. For me, working in the garment production sector is like being a complicit help facilitate the inhumanity of global supply chains. I always feel guilty about it and wholeheartedly wish that one day those workers will be better paid and have their workers' rights.

 

[Frida]

 

[Les_Sucettes]

The first section of "Gomorrah", the book about the Camorra, is about high fashion criminality and this was published back in 2006. Given the massive success of the book and the fact Saviano is still under police protection, I never really understood why that part of the book, and it's a large part, did not create a bigger scandal and is never really highlighted in the numerous adaptations.

 

[JohannesL]

Exclusive: LVMH's Dior lagged on supply chain disclosure, made outdated ESG claim​

By Helen Reid and Mimosa Spencer
August 6, 202412:09 PM GMT+8Updated 3 hours ago

PARIS, Aug 6 (Reuters) - LVMH's second-largest fashion brand Dior was until last month behind on disclosures required by UK law about working conditions in its supply chain, and made outdated statements on its website of a third-party certification that it terminated more than a year ago, Reuters has found.
In Britain, the Modern Slavery Act, opens new tab of 2015 requires companies with UK turnover of 36 million pounds ($46 million) or above to publish annual statements on their websites detailing the steps they are taking to combat forced labour in their business and supply chains globally.

Until July 19, Dior's UK website showed an anti-slavery statement from 2020 and a sustainability certification that was no longer valid, a Reuters review of company filings showed. Dior, part of $345-billion conglomerate LVMH that is getting a global marketing boost as major sponsor to the Paris Olympics, has come under the spotlight after Italy's competition authority on July 17 said it was probing whether it and Italian label Armani had misled consumers over their commitment to craftsmanship and social responsibility following a judicial investigation that exposed potential sweatshop-like conditions at some Italian contractors.

The investigation prompted Europe's top asset manager Amundi and other investors to ask LVMH to take more aggressive steps to monitor its suppliers' treatment of workers, these investors have told Reuters. Dior has condemned the illegal practices uncovered at some suppliers, said it had stopped working with them and that it was cooperating with authorities. Armani has expressed confidence in a "positive result following the investigation."

Dior published a 2023 modern slavery statement after Reuters enquired on July 18 about its compliance with the UK regulation. The new document says it was approved by subsidiary Christian Dior UK's board on July 18. In its updated modern slavery statement, which is longer and more detailed than its 2020 one, the French brand said Christian Dior UK plans a training course to raise employees' awareness of modern slavery and to encourage them to take action if they suspect wrongdoing.

"We have been preparing an up to date modern slavery statement, which...has now been published on our website," Dior said in a written statement on July 19 in reply to Reuters' inquiries about the anti-slavery disclosure. As of Aug. 5, Dior also had not published statements for 2021 and 2022. The company did not directly address Reuters questions about its missing statements. Although publishing the statements is mandatory by law, no company has been penalized for not complying, according to Sara Thornton, professor of modern slavery policy at the University of Nottingham's Rights Lab. Some lawmakers and rights groups are pushing for penalties to be introduced.

In 2020, Britain's Home Office estimated that 83% of eligible organizations complied with the Modern Slavery Act. LVMH on July 19 said in an email to Reuters that its UK-based Dior subsidiary applies "group wide procedures concerning respect for human rights and addressing modern slavery risk in our business and supply chains." Another subsidiary, Parfums Christian Dior UK, has published British modern slavery statements for 2021, 2022 and 2023.

LVMH Chief Financial Officer Jean-Jacques Guiony said in a call with analysts on July 23 the conglomerate was unaware of the alleged worker exploitation at the Dior suppliers in Italy, adding LVMH "accepted full responsibility for what happened." Guiony said LVMH would "intensify" controls over its supply chain, adding that it planned to strengthen audits and controls of its subcontractors.

'A CERTIFIED APPROACH'​

Until July 19, the sustainability page of Dior's website also featured the Butterfly Mark, a certification by luxury-focused sustainability audit firm Positive Luxury, which assesses companies on 23 environmental, social and governance issues.
Above the Butterfly Mark logo, a statement titled "A Certified Approach" said Christian Dior Couture obtained the certification in 2021 "following a rigorous audit", adding that it "attests to the authenticity of its sustainability strategy".
In June 2023 Dior, which was due to start its reassessment process, decided not to do so, CEO Amy Nelson-Bennett told Reuters on July 17. "Their Butterfly Mark certification and community membership was therefore terminated," she said.
Brands are required to remove the certification mark within 90 days after deciding not to be reassessed, Nelson-Bennett said. Dior removed the certification mark and accompanying statement in July 2024.
Approached by Reuters, Dior and LVMH did not respond to a request to comment on the certification and the logo on the website.
Positive Luxury currently certifies, or is reviewing, roughly 170 brands, including LVMH-owned Belvedere Vodka. Its audit asks companies and brands to answer hundreds of questions on environmental, social and governance issues, including how much oversight a brand has on suppliers.

Positive Luxury reassesses all the brands that it certifies every two years, adjusting its audit to keep up with new regulations, Nelson-Bennett said.
Companies are gearing up for new European Union supply chain rules that require tighter audits of suppliers to mitigate human rights and environmental risks.
($1 = 0.7768 pounds)

source: reuters.com