Opinion: There’s No Secret to Freeing Luxury’s Supply Chains From Scandal

When Italian prosecutors linked the supply chains of luxury labels like Armani, Dior, Valentino and Loro Piana to cases of labour exploitation, the news travelled far beyond the Milan courthouse where the cases were brought. These are maisons that stand for heritage, excellence and trust, yet the accusations sounded familiar: subcontracted workshops where workers were underpaid, uninsured or working in unsafe conditions.

And the problems aren’t going away. Just last week, Tod’s became the latest brand to come under scrutiny from Milanese prosecutors. The footwear brand contests the allegations.

The underlying issues don’t lie with Italian craftsmanship itself, but the networks behind it. In systems where orders cascade from one small factory to another, brands can lose sight of who is producing their goods and in what conditions. Recent cases in Italy show how this lack of visibility creates risk.

After LVMH-owned mega-brand Dior was placed under court administration for failings in its supply-chain oversight, investors led by Europe’s top asset manager, Amundi, called on the luxury giant to tighten controls.An investigation by Italy’s antitrust authority into whether Dior misled consumers about working conditions in its supply chain closed only after the brand pledged €2 million ($2.3 million) towards anti-labour-abuse initiatives and stricter oversight. A similar case against Armani resulted in a €3.5 million fine and an uncomfortable link to ultra-fast-fashion giant Shein, which was handed a similar (smaller) penalty for greenwashing in the same week. Armani has said it will appeal the finding.

These episodes show that scandals are no longer reputational risks alone. They now bring legal, financial and governance consequences. Even where brands are able to distract from missteps with glossy marketing campaigns, as they often have done in the past, repeated controversies corrode reputation and intensify scrutiny from regulators, investors and consumers.

Luxury cannot afford to wait for the next scandal before acting. Protecting heritage means engaging proactively with supply chains, not scrambling around doing damage control once problems come to light. Long-term resilience depends on anticipating risks rather than reacting to them.

To be sure, the industry is working to address some of these challenges. In Lombardy, where Milan is located, it has engaged with local officials to establish a database that could set a shared framework for transparency and accountability across fashion supply chains. However, its scope is limited and participation is voluntary.

To be truly effective, such coordinated efforts should should evolve toward preventive standards, integrating fair purchasing practices, supplier capacity building and independent verification. Only by addressing the structural pressures that drive irregular subcontracting can responsible operations become embedded practice.

How to achieve this is no secret. Indeed, there are well-established strategies to address such risks.

1. Align sourcing practices with responsibility

Many problems begin with how orders are placed. When prices are pushed too low or timelines too tight, it creates the conditions for irregular subcontracting and prevents suppliers from investing in higher standards. Brands should build purchasing practices that allow for safe production and margins that are sufficient to cover legal minimum wages, while enabling progress toward fairer conditions.

Responsible sourcing starts with fair terms of trade, not just factory oversight.

2. Look beyond the first tier

Risks rarely sit in the suppliers brands know best, but in the layers they rarely see. Simply banning unauthorised subcontracting is not enough. Brands need to build a live picture of their full supply base, tracing not just direct partners but also secondary workshops and home-based producers. This requires ongoing supply-chain mapping and cross-checking with industry peers. A transparent and regularly updated supplier registry, like the one the industry is looking to establish in Lombardy, helps prevent blind spots and creates the foundation for meaningful oversight.

3. Verify, don’t just audit

Standard audits are often limited: visits are too often announced, access to documents is controlled and workers are rarely interviewed without pressure. Increasing their number only creates fatigue and multiplies costs without improving accuracy. A stronger approach is fewer, deeper inspections — unannounced, worker-focused and supported by payroll checks — ideally coordinated across brands. This reduces duplication while giving a more accurate picture of conditions.

4. Strengthen worker voice

Policies alone do little if workers cannot raise concerns safely. Too often, grievance channels exist on paper but are not trusted or accessible in practice. Companies should support mechanisms that are independent, confidential and linked to clear remedies. Engaging with unions or worker associations where present adds credibility and improves early risk detection.

5. Embed responsibility across the organisation

Oversight should sit at board level, and sourcing teams should be assessed on social outcomes as well as financial margins. In practice, this means ensuring clear accounstability and specialist capacity within the business, so that commercial and ethical priorities are aligned rather than competing. Supplier contracts should also make expectations enforceable, linking business continuity to compliance with standards. When governance, incentives and expertise come together, responsible sourcing becomes a driver of resilience and brand equity.

When the Scandal Has Already Hit

For brands already facing allegations, silence or shifting blame only deepens mistrust.

Confidence is rebuilt when responsibility is acknowledged, remedies are delivered quickly and there is proof that violations will not be repeated. That means settling unpaid wages, regularising contracts and giving workers real access to grievance mechanisms. The priority is that corrective actions are transparent, time-bound and properly monitored.

Above all, lessons need to be integrated into governance practices so a crisis becomes a turning point rather than a recurring cycle.

Luxury’s next chapter will be written where heritage meets responsibility. “Made in” can no longer mean geography alone; it must also stand for true oversight that supports dignity for workers and builds trust with suppliers.

Those who act now will not only avoid the next scandal, but emerge as industry leaders, defining the next benchmark for responsible operations and safeguarding their luxury heritage and value proposition.

Caterina Occhio advises the UNIDO FairShare programme and leading luxury houses on responsible supply chains. She co-founded the certified ethical supplier network Ethicarei and serves on the global board of the World Fair Trade Organisation.

The views expressed in Opinion pieces are those of the author and do not necessarily reflect the views of The Business of Fashion.

Want to dive deeper into an insight from this article? Check out The Brain of Fashion, BoF’s new generative AI tool where you can unlock BoF’s sustainability archive with a single question.

How to submit an Opinion piece: The Business of Fashion accepts opinion articles on a wide range of topics. The suggested length is 700-800 words, but submissions of any length within reason will be considered. All submissions must be original and exclusive to BoF. Submissions may be sent to opinion@businessoffashion.com. Please include ‘Opinion |’ in the subject line and be sure to substantiate all assertions. Given the volume of submissions we receive, we regret that we are unable to respond in the event that an article is not selected for publication.

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.