Late on a Friday afternoon earlier this month, a smattering of international media received an urgent summons to the Milan headquarters of Tod’s: the luxury Italian footwear company’s chairman, Diego Della Valle, was hosting an impromptu press conference to address allegations of labour exploitation in the brand’s supply chain.
In an unfiltered 20-minute monologue that sought to discredit the foundations of a scandal that has plagued the luxury sector for the best part of two years, Della Valle hit out at a series of investigations led by Milanese prosecutor Paolo Storari that have linked the Italian supply chains of six luxury brands, including Tod’s, Armani, Valentino and LVMH stablemates Dior and Loro Piana, to sweatshop labour.
In his remarks, the executive alternately questioned Storari’s motives, downplayed the risks of exploitation in luxury manufacturing, professed the robustness of Tod’s own supply-chain controls and criticised “impossible” regulatory requirements that brands monitor the entire length of their complex and opaque supply chains.
“To talk carelessly about trivial things as if we were real criminals — in my opinion, that’s something to be ashamed of,” Della Valle said. “We’re not the financial police. That’s exactly why we need to look at the law in detail and rethink how certain rules are written, because the way things stand now, they just don’t work.”
Fashion companies should be expected to guarantee the working conditions in their own factories and those of directly engaged suppliers, but monitoring subcontractors further down the production chain should be the purview of regulatory bodies and law enforcement, Della Valle said.
The executive’s vigorous arguments contrast with the more muted approach to messaging the industry has largely taken on the issue until now. Brands caught up in the scandal have mostly limited their communications to carefully worded statements, emphasising their efforts to tighten up supply-chain controls while downplaying any alleged lapses as isolated and exceptional incidents.
But more recently, Italian trade groups have become more vocal in defending the sector.
Labour groups fear the rhetorical shift could signal a renewed effort by the industry to disengage and distance itself from issues luxury players have long sought to pass off as a fast-fashion problem, attacking the narrative, rather than tackling what prosecutors see as the root cause of the problem: a purchasing system that turns a blind eye to risks of labour exploitation in order to maximise speed, agility and, ultimately, profits.
“Denying and minimising what is emerging is a serious mistake… What is needed are investments in supply chain sustainability to strengthen suppliers instead of treating them like lemons to be squeezed dry,” said Deborah Lucchetti, a coordinator for Campagna Abiti Puliti, the Italian branch of labour advocacy group Clean Clothes Campaign.
Notes on a Scandal
Though most of the brands caught up in the scandal have remained discreet in their public messaging, they’ve also shifted blame down the supply chain to subcontractors operating well beyond the reach of what they say standard oversight processes might reasonably be expected to catch, even as prosecutors have highlighted several cases where they say companies directly contracted illegal workshops or failed to identify clear red flags in audits.
Meanwhile the message to investors is that any weaknesses in supply-chain controls have been addressed and the scandals haven’t affected consumer demand. The numbers appear to back this up: during its third quarter results last week LVMH highlighted Loro Piana’s “excellent performance,” without referencing court sanctions placed on the top-end luxury label just as the period began.
The Italian industry is pushing back more vocally. At a roundtable breakfast ahead of Milan fashion week last month, Carlo Capasa, the chairman of industry lobby Camera Nazionale della Moda Italiana (CNMI), criticised media stories he said damaged the reputation of “Made in Italy.” Other members of the group’s board flanked Capasa, including Luigi Maramotti, chairman of Italian fashion house Max Mara, who said prosecutors and journalists were taking workplace violations out of context.
Della Valle was more explicit. “Being silent now means becoming accomplices to a system that harms us,” he told reporters at his press conference earlier this month. The company diligently certifies the standards at its direct suppliers, but requirements that it should have visibility over subcontractors are “not practical, objectively not feasible… not our job,” he said.
The comments came two weeks after CNMI awarded Tod’s a sustainable fashion prize for a digital passport programme that promises to guarantee traceability for two of the company’s iconic products, the Di Bag and the My Gommino moccasin.
“We are honoured to receive this recognition, which celebrates our commitment to merging traditional craftsmanship with sustainable innovation,” said Tod’s creative director Matteo Tamburini while receiving the award at a gala event held at Milan’s storied La Scala opera house. Tod’s declined to comment further, citing ongoing legal proceedings.
The Italian business was taken private last year, with the Della Valle family retaining a 54 percent stake. LVMH and L Catterton, a private equity fund backed by the French luxury conglomerate, own the rest.
While companies that have to answer to public markets “can’t get into the mud,” executives at privately held businesses can speak more freely, said Tariq Fancy, who served as BlackRock’s first global chief investment officer for sustainable investing and is now a lecturer at Stanford University.
LVMH and L Catterton did not comment.
The Rest Is Politics
The debate over whether big brands should be responsible for what happens in their supply chains dates back decades, but successive scandals have lent heft to calls for greater accountability — and in some cases an end to the defensive posture often adopted by brands
“In the late ‘90s when a lot of these investigative reports started to surface around brands like Nike, the companies tended to respond defensively,” said Auret van Heerden, a labour and human rights expert who previously served as president and CEO of the Fair Labor Association. “Brands would claim they’d followed the law and had audited, and insist they’d taken all the measures that were reasonably possible to take, or that the accusations were somehow malicious… You can see that same thing emerging in Italy.”
Nike ultimately led a shift towards greater transparency in the industry, under pressure from protests on college campuses — a key consumer constituency for the sporting giant. Brands that had long resisted calls to ensure minimum safety standards in factories they worked with, signed on to agreements making them legally accountable for doing so after the deadly Rana Plaza factory collapse in Bangladesh in 2013. The incident made international policymakers start pushing for tougher supply-chain regulations.
But luxury is facing its own reckoning at a time when policymakers are prioritising economic growth over responsible business practices and consumers don’t appear unduly bothered by the labour scandals.
In Europe, plans to introduce legislation that would make brands accountable for environmental and labour abuses in their supply chains are in the process of being significantly watered down in the name of industrial competitiveness. US negotiators have pushed back against the regulation in trade talks.
Della Valle’s remarks come as the scandal swirling around “Made in Italy” becomes increasingly politicised domestically. The country’s luxury manufacturing prowess is a key soft power lever and significant industrial contributor to the economy.
“We’ve reached a point where they understand that ‘Made in Italy’ is at stake,” said Caterina Occhio, a sustainability advisor who works with the UN and luxury houses on responsible supply chains. “You clearly see a different message.”
Following his comments, Della Valle spoke with the country’s Minister of Business and Made in Italy, Adolfo Urso, who said the government is “committed to protecting the sector’s reputation.” Its proposed solution: a voluntary database of certified suppliers that brands could use to demonstrate good-faith efforts to ensure responsible supply chains.
Industry trade groups welcomed government efforts to push through a series of amendments to a new law that would turn the concept into a regulatory reality, following an emergency roundtable convened by Urso. The Italian senate has approved the law, which now passes to the lower house and is expected to be approved with only minor changes.
“We wanted the certification process to be voluntary because that will allow us to see which companies are interested in protecting ‘Made in Italy’ and everything it stands for,” said Luca Sburlati, chairman of Confindustria Moda, the fashion industry offshoot of Italy’s largest employers’ lobby. “I’m sure that all companies will sign up and with the auditors being independent and certified we are sure to have a robust system of controls.”
Additional proposals would make it obligatory for all fashion industry workers to be covered by national contracts that guarantee a minimum wage and a maximum number of hours that can be worked. A relatively small number of people work without the protection of national contracts and bringing them under that umbrella will solve 95 percent of the current illegal labor practices, according to Sburlati, who acknowledged the industry has a role to play in addressing the issues.
“We can’t hide from what has happened in our supply chains; it has to be addressed and that is what we are doing,” said Sburlati. “The illegal practices in the supply chain have to stop and it’s our job to get that done.”
But opposition politicians and labour leaders are hitting back at the new law, which they say effectively absolves brands of responsibility.
“The government has effectively erased the crime [of worker exploitation],” said Alessandro Genovesi, who deals with issues of worker exploitation for CGIL, Italy’s largest labour union. “It has effectively provided outright protection to irresponsible business models.
Meanwhile, the wider debate is also continuing, with many large companies across industries supportive of tougher due diligence regulations. Earlier this month, fast-fashion company H&M Group, whose sprawling global supply chain is arguably much harder to police than the more contained Italian manufacturing ecosystem widely used by luxury labels, joined nearly 500 other investors, companies, trade groups and financial services in calling on the EU to preserve core elements of its supply-chain regulations.
Luxury labels, who use the heritage, craft and integrity of their supply chains as a branding tool, should know better than to argue against such moves, said Ken Pucker, a professor of practice at Tufts University’s Fletcher School and former chief operating officer at Timberland.
“The industry’s response seems particularly discordant,” he said. “Now, three decades from Nike’s supply chain woes, one would think that brands would accept responsibility for their supply chain.”
Disclosure: LVMH is part of a group of investors who, together, hold a minority interest in The Business of Fashion. All investors have signed shareholders’ documentation guaranteeing BoF’s complete editorial independence.
