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François-Henri Pinault on Sustainability

Kering's chairman and chief executive officer has set ambitious goals, and on Tuesday also put them front-and-center at the firm's annual shareholders’ meeting.

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PARIS — Did you know Stella McCartney’s fall collection features sustainable wool fabrics sourced from certified farms on Patagonia’s grasslands? That the Saint Laurent flagship on Avenue Montaigne here is lit entirely by energy-saving LEDs?

That Gucci’s latest Bamboo handbags, in stores since November, are made with leather tanned in such a way that uses less water and no harmful heavy metals?

All these innovations are the fruit of Kering’s sustainability efforts, spearheaded by chairman and chief executive officer François-Henri Pinault, who prefers to let his firm’s actions, and products, speak louder than his words.

“I don’t want to sound like greenwashing,” he demurred in a rare interview this week, flashing a big smile and blushing slightly when asked why such eco efforts are often introduced under the radar. “It’s not a question of consumption, but rather of consuming differently.…We will get to a time when consumption will be clean.”

While calling McCartney’s brand the most advanced in the group in terms of eco friendliness, he noted that “when you go into her stores, it’s not written all over the walls or on the hangtags — it’s just like that.

“We do it because that’s how we think things should be done, and I think that in the medium- to long-term, we will be recognized for the work there,” he added.

The French business titan may be bashful of trumpeting green achievements, yet his convictions are plain and have deepened in recent years.

“If we wait for governments to solve the environmental crisis, not much will happen,” Pinault stressed, dressed in shirtsleeves in his modest office on the Avenue Hoche here. “It is up to us to show initiative, to be extremely proactive and go beyond simple compliance rules.”

Convinced his family-controlled group must do far more than what regulations might compel — and even ahead of what consumers might demand or even care about — Pinault has set ambitious goals, and on Tuesday also put them front-and-center at Kering’s annual shareholders’ meeting. During the meeting, Pinault tabled a midterm progress report on the company’s environmental and social efforts.

To light a fire under its executives, the French group made public its 2016 sustainability targets back in 2012. Among them are reducing carbon emissions, waste and water usage by 25 percent; eliminating PVC from all collections; sourcing gold, diamonds, leather, precious skins and fur from responsible, verified and sustainable mines or farms, and switching to paper and packaging that is 100 percent sustainable and made from at least 50 percent recycled content. The firm also aims to phase out hazardous chemicals from all production by 2020.

Already, one target is within reach: 98 percent of product stockkeeping units at Kering — whose brands range from Boucheron in jewelry to Puma in activewear — are free of PVC, a material still found mainly in small components for leather goods and luggage.

While McCartney’s causes are well known — she shuns fur and leather, instead making shoes and bags from a bioplastic coated in a nonedible vegetable oil derivative — Pinault said all of Kering’s designers are implicated in, and sensitive to, the group’s sustainability efforts.

Hedi Slimane, creative and image director at Saint Laurent, is certainly active: Last year, the firm set up an online sustainability community via Intranet, counting more than 955 members, or roughly 70 percent of employees. All new store concepts for Saint Laurent employ LED lighting, which cuts energy consumption by about 30 percent — and roughly a fifth of the entire store network has been retrofitted.

Yet creating more energy-efficient stores and greener packaging is only part of a bigger and more complex picture, Pinault said. He explained that most of Kering’s sustainability efforts are focused on the front lines of its supply chains: to the farms, evaluating how cotton plants, sheep and cattle are raised. Sustainability considerations include if plants and livestock are raised in such a way as to not upset the local eco system, supplant food production or negatively impact the social welfare of the workers involved.

Ditto for extractions of precious metals and diamonds, which must not only derive from certified mines and honor the Kimberley Process to prevent so-called conflict or blood diamonds. According to Pinault, such materials must come from verified operations that do not harm local livelihoods, wildlife or ecosystems “so it goes a step further.”

He revealed that the group recently made a purchase order for 30 kilograms, or 1,058 ounces, of certified FairMined gold from Peru, billed as the single largest purchase of its kind to date.

Given that leather goods is a key activity of the group, reducing harmful production methods is also a key focus. Pinault recalled that when he invited chemists to explore tanning methods eliminating heavy metals such as chromium, they shrugged and said it would not be possible. But after two years of research funded by Kering, Bottega Veneta and Gucci are already employing the new “heavy metal-free” leather, which is billed as having the same luxurious nature as skins tanned in the traditional way.

While it was not the intended outcome, Kering discovered that the new tanning technique consumes 30 percent less water and 22 percent less energy and therefore costs less, supporting Pinault’s assertion that sustainable practices are as good for business as they are for a clear conscience.

Similarly, shipping products by barge rather than plane or truck “does not penalize the business and saves us money” — along with cutting its carbon dioxide emissions.

“My conviction is that we gain directly and indirectly,” Pinault said. “We are also there to lead by example and try to ensure that other companies are inspired by what we do.”

Kering ultimately plans to share its findings about more sustainable practices so that other companies can learn how to be greener, and more alert to social commitments, too.

As Gucci is a major user of python skins, Kering recently teamed with two conservation organizations to form the Python Conservation Partnership, which aims to improve the sustainability of the python trade by focusing on sustainability, transparency, animal welfare and local livelihoods. The partnership’s first report on captive breeding was released earlier this year. Pinault noted the efforts are not designed to stamp out wild capture of the snakes because it would jeopardize those dependent on the trade. “If we were to go too fast with captive python breeding, we would endanger the livelihoods of hundreds and hundreds of communities,” he said.

Gucci is exploring the possibility of developing its own python farm in Southeast Asia.

Since 2012, Gucci converts leather cuttings — 230 tonnes in 2013 — into fertilizer, and is testing a process that converts crocodile skin cuttings left over from bags into shoes. These are to be sold later this year on a special-order basis.

In this vein, Kering also established a Materials Innovation Lab. Based in northern Italy, four researchers are charged with developing a library of sustainable raw materials that is at the disposal of all the brands in the group.

Asked if he sees the sustainability movement gaining more favor in the mainstream, Pinault tempered his optimism.

“I think it’s moving in the right direction,” he said. “Still, I think there are too many firms who consider sustainable development as a regulatory constraint that must be respected and too few companies who share our view: That sustainable development represents an historic opportunity for all companies — whatever their specialty, geography or size — in terms of differentiation.”

He cited Unilever as one large company that shares his vision, and also mentioned The B Team, a nonprofit initiative founded by former Puma ceo Jochen Zeitz and Virgin Group founder Sir Richard Branson that aims to skew attention away from short-term profits toward long-term good for people and the planet.

“My father [François] taught me that a company only has meaning if it develops alongside its business purpose other values and responsibilities outside the economic sphere,” Pinault said. “We feel it’s up to us to show initiative, to be extremely proactive and go beyond simple compliance rules or regulations that are imposed.”

Asked if consumers are embracing the sustainability cause, Pinault warned that businesses can cite a lack of behavioral change as a handy excuse.

“We’re not going to hide behind this,” he said. “Too often companies tell themselves that consumers don’t change, or anyway, despite their efforts it’s not perceived as a difference for consumers — so let’s not go too fast. It’s a vicious cycle.

“I’m convinced that one day, people will naturally buy sustainable goods because there will only be these goods.”

Alongside its environmental ambitions, unveiled in 2007 and propelled in part by the creation of an in-house team devoted to corporate and social responsibility matters, Kering has also taken on the cause of stopping violence against women, even screening films about genital mutilation and rape to raise awareness about these topics, which are often brushed under the table.

Pinault reasons that it is vital for a company with a workforce that is roughly 60 percent female, and one embraced and promoted vigorously by his wife, actress Salma Hayek. “We are not obliged to do this, and it is not glamorous at all, except that I think a company, private as we, can make a difference in this area,” he said.

He said the company is even probing the psychological factors that might help explain why few women rise up the corporate ladder — up to and including the fact that women may not express their ambitions as plainly as men.

He said company-wide sustainability efforts — with a good portion of executive compensation tied to meeting sustainability targets — have had a galvanizing and motivating effect with its employees.

“Young people are extremely sensitive to it, much more than previous generations, including myself, and that is a real element of motivation and pride of belonging to the company,” Pinault said. “This is something that is not quantifiable, but I think it gives us an extra dimension that resonates among many people in the business and is reflected in the medium and long term by the additional loyalty to the company.”

About 50 of Kering’s 36,000 employees are wholly dedicated to sustainability efforts, including at least one dedicated specialist embedded in each brand. Larger ones house sustainability departments. Marie-Claire Daveu, chief sustainability officer and head of international institutional affairs at Kering, joined Pinault for Tuesday’s interview, interjecting with key data and facts.

At Tuesday’s annual meeting, she reported that since 2012, the group has reduced its carbon footprint by 4 percent and its garbage by 15 percent.

Raising its image in the green arena, Kering has received several awards, including the FIR Prize of Analysts for Socially Responsible Investment and the 2014 Global Leadership Award in Sustainable Apparel, presented in Copenhagen last month.

Kering’s big test will come in 2016, when it plans to publish an Environmental Profit & Loss account for the entire group. To date, 73 percent of its businesses are already covered by the rollout of an accounting method quantifying the environmental impact of all its processes, from production and transport to sales.

Puma was the first group brand to embrace EP&L in 2011.

Initial data suggest that farming, for cattle, cotton or other textiles, accounts for 39 percent of the group’s environmental impact and fabric production, tanning and metal refining, 24 percent.

Pinault stressed that it’s best to give prior consideration to sustainability and improving the company’s track record at the outset before launching any project or process. “We do not pose the question when it’s finished, as is too often the case,” he said.

At Tuesday’s meeting, shareholders approved the appointment of Daniela Riccardi, ceo of Baccarat, as a member of the Kering board for a four-year term.

The salaries of top executives have come under growing scrutiny in France since the recent introduction of “say on pay” votes at shareholder meetings. Accordingly, many of the questions centered on compensation packages for Pinault and group managing director, Jean-François Palus.

Shareholders heard that Pinault is due to be paid revenues totaling 4 million euros, or $5.3 million, for 2013. This includes a fixed salary of 1.1 million euros, or $1.5 million, a level unchanged since 2011, according to Patricia Barbizet, vice chair of the board at Kering.

Pinault is also due to receive variable pay of 1.2 million euros, or $1.6 million, and a long-term performance bonus worth 1.5 million euros, or $2 million.

Meanwhile, Palus is set to earn 3.8 million euros, or $5.1 million, including a fixed salary of 1 million euros, or $1.3 million, and a long-term bonus of 1.2 million euros, or $1.6 million. All dollar rates are calculated at average exchange rates for the period in question.

Shareholders approved Pinault’s salary package by 97.6 percent, while 90.7 percent endorsed the compensation awarded to Palus, who was also entitled to an annual allowance of 900,000 British pounds, or $1.4 million, as a result of his move to London in July 2013.

Pinault said the package reflected the high cost of housing in London, adding that Kering made sure that any move abroad by one of its executives did not entail additional costs for the group.

He added that France’s planned tax of 75 percent on the portion of salaries exceeding one million euros, or $1.3 million, only applies to seven people at Kering. Pinault noted that the decree that will allow the law to go into effect has yet to be published, so it remains unclear how it will affect companies and their staff.

 

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