To ask the question – is there a sustainable future for luxury might sound a dumb question to ask given that the luxury industry surpassed the €1billion mark in 2015. But in actual growth terms, the industry has been slowing down over the past 5 years in real growth terms to around 1–2% — attributed by the annual luxury survey from Bain & Co to fluctuating market volatility driven by currency swings and ﬂuctuating tourist ﬂows.
We are all doing business in turbulent times where change is the only constant. We could also be considered to be standing on the edge of a major shift in human evolution, where current and future generations are focused much more strongly on living with purpose and meaning. We are arriving at a point where even science and spirituality are meeting to create new possibilities for humanity.
That gradual shift hasn’t had much of an impact on the luxury consumers of the Far East or anywhere else very much as yet, but given that a lot of spiritual enlightenment stems from this area of the world, how long can it be before the appetite for luxury goods in the exploding upper middle class markets of Asia evolves? What then? What kind of strategy can help luxury (or any other) organisations make the shift from the business model for an era of certainty and growth to an era of uncertainty, slowing sales and fading relevance — if it happens?
How can luxury brands become purpose-led?
A growing body of research indicates that purpose-led enterprise may be a bridge between worlds. Recent studies by organisations such as Nielsen show a significant move for Millennials and Generation Z from indicating preferences for natural, organic, sustainable, environmentally-friendly brands with a social purpose to a real commitment to paying more for them. Financial results coming out of companies like Unilever show that the brands in their Sustainable Living programme, with clear brand purpose built in, are achieving double digit growth and accounted for 50% of 2014 sales growth. As early as 2012 Edelman’s good purpose study revealed that in RGE markets (China, Brazil, India, Malaysia, UAE) consumers were already demonstrating more engagement with brands with societal purpose.
The challenge for luxury brands in this emerging environment is to create a business model and a brand narrative that resonates authentically with an audience that is increasingly critical of luxury at one end of the spectrum— the polarised and often critiqued 1% -whilst ever more indulgent at the other. It is a question of creating a new paradigm for what luxury will mean. Ultimately, it’s about merging purpose and profit through the unifying power of the universal human search for meaning. How can that be done?
It can certainly not be achieved without addressing the elephant in the room. In a world which is slowly inching towards authentic soulful reconnection, why do we need luxury? What is the place of luxury in the future of mankind on a planet with massive pressures on resources? It requires real vision and leadership to reimagine a new relationship between humankind, planet earth and luxury.
What could that look like? A world in which luxury is no longer associated with privilege but with purpose? One is which luxury becomes the guardian of the pure values espoused by Greek philosophers of the beauty of human endeavour and the aspiration to a purposeful life — eudaemonia? Or one in which luxury readopts the philanthropic values of care and concern for the needy in a new and inspiring format for the future?
From philanthropy to social purpose
Philanthropy has been the most common method of ‘giving back’ in the luxury sector for many decades, such as Miuccia Prada’s close connection with contemporary art through the Fondazione Prada, Sentient Jet supporting young film makers at the Tribeca Film Festival or LVMH-owned luxury travel retailer DFS Group teaming up with Make-A-Wish International to grant children’s wishes last Christmas. This has been the kind of partnership on which many charities have relied. But in an era of greater transparency and authenticity, this kind of philanthropy is beginning to be more closely examined and criticised as audiences and stakeholders look for genuine Corporate Social Responsibilty. Bluntly put corporate philanthropy, or charity, is essentially how a company gives its money away. CSR is about how a company makes its money, responsibly.
Whilst customer demand for purpose-led luxury hasn’t really kicked in yet, there are some changes afoot. Michael Kobold of Kobald Adventures set up Soarway Foundation just before the Nepal earthquakes. Though philanthropic in nature, there is a vein of deep spiritual gratitude which runs through his approach which connects to his experiences with the sherpas who accompanied him twice to the top of Everest.
Another luxury watch designer goes much further. Peter Thum, CEO of Fonderie 47 and Liberty United set up his transformative enterprise with a radical premise: that the sale of luxury goods could both deliver profits to investors and address a tough social problem: the proliferation of assault weapons across Africa. At a ‘mortgage-needed’ price of $195,000 the Inversion Principle Timepiece is a masterclass in the mariage of social enterprise, design excellence and marketing.
One of the most useful tools to have emerged to help brands in the last year are the UN’s Sustainable Development Goals (SDGs). I believe the SDGs offer a unique opportunity for all brands to commit to genuinely purposeful enterprise which resonates strongly across all demographics, whilst still remaining eminently profitable. With 17 different goals to choose from, and endless options in each, the SDGs offer a purpose-led pick’n’mix opportunity that as yet few brands are leveraging.
But transforming a luxury brand to a purpose-led business model is not an easy path. For those courageous brands willing to take on the challenge, here are some key factors to think about.
- World Changing Purpose
It starts by studying, feeling, sensing and allowing a greater purpose to emerge for your organisation than growth and financial returns. Why are you here? What is your relationship to the planet and the people who live on it? How are you here to enrich, protect, or enhance life on earth? Where do you want to have an impact? Which of the SDGs offers a most suitable opportunity to align your brand against?
- Purpose-Driven Leadership
Courageous vision and leadership has helped to create many of today’s outstanding brands and breakthrough innovation from Tesla to Virgin Galactic — both of which offer luxury experiences. Cultivating purpose-driven leadership both at the top of your organisation and through the existing hierarchy is essential.
- Understanding Emergent Global Change
Have a deep understanding of key emergent economic, social, environmental, technological, behavioural but also spiritual trends. It’s equally important is to develop future strategy around global frameworks such as the SDGs.
- Purposeful Organizational Structure and Culture
New structures and organisational models are emerging to support the transition to purpose-led enterprise. Forum for the Future’s Net-Positive model incorporates both social and environmental purpose. Frederic Laloux’s ‘teal’ model expressed in Reinventing Organisations is designed for the next step in human evolution. Otto Scharmer’s Theory U is a change management process designed for the emerging future.
- Purposeful Products & Innovation
Include new product and services development, guiding both strategy and innovation. Inspiration, frameworks and tools can be found in the sharing and circular economy, net positive business model, biomimicry, design thinking, and even sacred ecology and mindfulness meditation.
- Purposeful Communications & Engagement
Creating compelling brand positioning, marketing and communications are still essential elements of the purposeful enterprise. But this will require redefining brand purpose and narratives in a co-creative and collaborative manner, translating brand purpose into values-led language, making efforts to influence customer demand and behaviour in favour of sustainable consumption, and finding better ways to identify and track shifting customer attitudes and behaviour. Above all it will require a new form of communications which allows authenticity to shine through.
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Jenny Andersson is a brand & business strategy consultant working with organisations and start-ups to transform their future prospects through purpose-led enterprise. With over 30 years’ experience in brand communications, Jenny has worked with many of the world’s leading brands to integrate social and environmental purpose including Virgin, Levi Strauss and Timberland. She holds an MBA, MSc in Psychology, is a Fellow of the RSA. She curates The Purposeful Enterprise Online Summit 2016 first held on 11-13 April, 2016. If you would like to work with Jenny on activating purpose inside your business, contact email@example.com for a confidential chat.