More and more, consumers consider a brand’s ethical and sustainability practices in their purchasing decisions. According to reports by Nielsen, this influences consumer spending: 73% of millenials and 66% of customers globally would be willing to pay more for sustainable products. This growing demand can be especially observed within the fashion sector, and among younger consumers: Almost half of Gen-Z fashion consumers (43%) actively seek out and choose brands that have a trusted reputation for sustainable practices.
With this in mind, fashion consumers, particularly younger ones, are also becoming increasingly aware of deceptive practices applied by many companies trying to “greenwash” by capitalizing on sustainability trends without actually following through with any commitments.
Even global multi-brand fashion conglomerates like H&M can no longer cut corners with empty promises. The brand is being sued this year over accusations of greenwashing, with a lawsuit claiming that it is taking advantage of consumers’ interest in sustainability and products that “do not harm the environment” through extensive and potentially misleading marketing.
Recently, Boohoo, another fast-fashion giant popular amongst Gen X and Z, received viral online backlash for greenwashing after launching a “sustainable capsule” when the principles of fast-fashion production are anything but sustainable.
It seems the more revered a brand is, the higher the fall from grace can be. And the luxury industry in particular is no stranger to this level of scrutiny.
It was only a few years ago that Burberry was called out for burning US$37 million worth in merchandise instead of donating or recycling it. Meeting the standards of social and environmental responsibility continues to be a challenge for luxury brands, with many, like Louis Vuitton, under the microscope when it comes to environmental and social impact.
While many luxury brands do set targets to improve their practices, such as reducing greenhouse gas emissions generated by their operations, the issue lies in that there is no publicly available evidence to whether or not they are on track with meeting these targets, which can put their reputations at risk.
Reputation is everything in the luxury circuit. If luxury brands want to protect theirs against a customer base that is increasingly wary of deceptive practices, they need to show that their commitments to sustainability go beyond simple good intentions by building provable sustainability into their business models through verifiable data.
There is a huge push for greener practices all around. And while there are many luxury brands that have good intentions in meeting the demand for better sustainability, the challenge often lies in the fact that tracking progress against green targets is incredibly complicated within existing systems.
This is where blockchain comes in.
Innovative new technologies can help luxury brands digitize and automate their supply chain networks. Blockchain, for instance, can help track, trace and verify the sustainability of any luxury item with immutable certifiability, making it an interesting solution for brands who understand the importance of guaranteeing their products’ sustainability and protecting their reputations in the eyes of their consumers.
Trust is a critical factor of customer loyalty, and today’s consumers demand indisputable proof from luxury brands before buying into their advertising. Only 18% of Euroconsumers said they trust public authorities to verify green claims, and as little as 14% of participants said the same for private auditors. Given this increasingly environmentally-conscious customer base, brands need to find ways to prove that their products are sustainable and that the products consumers are buying align with these values, if they are to build brand loyalty.
Consumer concerns around greenwashing result from brands lacking transparency around their practices. This is where blockchain can provide a record of a product’s entire history, validating to consumers that the products they buy are verifiably sustainable. Luxury brands can thus provide to their clientele accurate records of their sustainability, building brand trust and customer loyalty, which is important for customers who want to ensure they are purchasing sustainable products. Implementing blockchain technology in direct-consumer spheres could drastically change the ways brands communicate with their customers, and the investment for luxury brands looks to be well worth it.
Another area where luxury brands are looking to increase transparency and guarantee provenance is digital product passports. These digital certificates enable customers to access a product’s data records and history via a mobile device application. As a blockchain-powered tool, customers can track a product’s lifecycle from creation to sale, validating the source of materials used as well as the markets it is sold in. Digital product passports give irrefutable proof that luxury companies are applying sustainable and ethical methods, protecting them from accusations of greenwashing. They answer to the growing needs of buyers, whether they are Gen Z or Gen X.
Demonstrating sustainability practices through real, tangible efforts is non-negotiable for luxury brands today, especially as they target and build relationships with younger demographics. They must also understand the importance of a consumer-centric approach and personalized online experiences. According to a Bain & Company forecast, online will become the most prevalent channel for personal luxury goods by 2025, accounting for up to 30% of the global market — closely followed by retail stores (26-28%) and outlet stores (13-15%).
As digital natives, the new generation of buyers expects intuitive and modern online experiences, just as they also value the authenticity and integrity of brands. This is unlikely to be a passing trend. If luxury brands want to thrive long-term, proving sustainability is essential to engaging with the next generation of consumers, who are tech-savvy and environmentally conscious. By turning to innovative technologies like blockchain, luxury brands can secure their place amongst the future generations to come.
Lars Rensing is the Netherlands-based CEO and cofounder of Protokol, an enterprise blockchain services provider. He is also a cofounder of Ark, the open-source platform that underpins Protokol’s blockchain services. In addition, Lars serves as an adviser for a number of startups that leverage blockchain technology.
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