MILAN — Italian TV show “Report” zeroed in on Gucci on Sunday evening during its latest attack on the luxury industry.
This story first appeared in the December 23, 2014 issue of WWD. Subscribe Today.
According to presenter Milena Gabanelli and the show’s investigations, Gucci allegedly employs low-cost Chinese workers behind Italian figurehead artisans — an accusation the Florence-based firm firmly refuted on Monday morning.
“Gucci completely disassociates itself from both the content and the form” of the show, said the company, noting that Gabanelli “has deliberately avoided to seek comment from Gucci in relation to what she was covertly filming for over five months. Hidden and inappropriately used cameras, shooting carefully selected supplier companies (three out of a total 576), do not provide for a true or accurate representation of Gucci and its supply-chain policies and procedures.”
“Report” accused Gucci of advocating the employment of Chinese low-cost workers. This allegation is “false and void of any foundation and strongly defamatory,” responded Gucci, as is a phrase pronounced during the show that “within the company there must be an Italian figurehead.”
The show’s tie-up with laboratories that employ low-cost Chinese workers “unbeknownst to Gucci” and “sabotaging the existing control systems, is a scam. Gucci disassociates itself from this practice and will take all the necessary actions against those responsible,” it said.
The company is a staunch supporter of Made in Italy production and touts the transparency of its pipeline. On Monday, Gucci stated that it produces 100 percent of its leather goods in Italy, employing more than 7,000 individuals between first-tier suppliers (with 1,981) and second-tier suppliers. Of these employees, around 90 percent are Italian citizens, while all 576 supplier companies are registered corporations in Italy.
All suppliers of first and second level are regularly controlled (with around 1,300 checks per year, also at night) “to verify compliance with Gucci’s supply-chain policies for the correct treatment of the workforce,” the company said. “It is important to note that nighttime work, which respects the relevant laws and approved policies, is called ‘overtime’ or ‘shift work.’”
Gucci said it deprecated the representation of the company provided by the show.
“Gucci has been working for years to maintain its production in Italy and will consider all options available to defend and protect its rights, reputation and brand image, as well as the rights of the more than 45,000 individuals, who are employed directly or indirectly in its production supply chain in Italy,” said the company.
“The continuous actions undertaken by the company in relation to its supply chain during the last several years has allowed, and will continue to allow, the traceability of the entire supply chain in a transparent and shared way with all stakeholders (local trade unions, Confindustria, CNA Firenze). A model that should be valued and appreciated, and which would have become apparent if ‘Report’ had been interested in the over 500 other suppliers, who work in full compliance of the policies,” Gucci continued.
That said, the company underscored that it continues to monitor the pipeline and take action against any practice that infringes its supply chain agreement, as per its Supply Chain Protocol ratified in 2009.
Gucci noted that the supplier the show focused on, the company Mondo Libero (from mid- 2013 through a firm called Almax), is responsible for 0.19 percent of Gucci’s entire production of leather goods.
“Mondo Libero has been subjected to several audits in past months, even during the night, that have highlighted issues relating to working conditions. Gucci requested that corrective actions be taken to rectify the issues that were identified. Mondo Libero had given evidence that the issues have been addressed and mostly resolved,” said Gucci.
Addressing “the apparent indecision” seen on one inspector recorded through a hidden camera, Gucci noted that inspections are first based on an audit of pertinent documents, and then based on action.
“The video recordings are focused on the first part,” the company said. “It is also important to note that inspectors do not have immediate coercive rights, but recommend actions based upon the outcome of the audits. The audit in question highlighted issues that have subsequently been addressed.”
Gucci said it remunerates small artisan entrepreneurs, as long as they “work responsibly.” It explained that “studies commissioned by the institutions involved in the development of Gucci’s Supply Chain Protocol state that the budget of a well-operated workshop allows the owner to achieve a profit of 8 to 15 percent, while remunerating workers fully respecting the relevant national collective agreements. Gucci is unaware of and refrains from agreements between first- and second-tier suppliers, and in this respect between Almax and Mondo Libero, that do not adhere to the given guidelines that are clearly stipulated by its Supply Chain Protocol, in place since 2009. The way in which ‘Report’ chose to present a partial and unbalanced reality is evident and, as a result, has attempted to stigmatize Gucci’s approach, which is fully in accordance with the policies agreed upon with the relevant institutional bodies.”
“Report” also accused Gucci of steep product mark-ups, and the company also challenged this accusation.
“‘Report’ compares in an incorrect way the price of a bag to the consumer with the cost of a single phase of production. The 24 euros [or $29.34 at current exchange] cited in the report refer solely to the cost of partial assembly and does not take into consideration, for example, the cost of the raw materials (leather), the metal hardware, the cost of cutting, the packaging, the shipping and the other costs associated with the sale of the bag in the store, all factors which would require that the cost provided be multiplied by up to 25 times,” said Gucci.
The show has over the years tackled the issue of ethical manufacturing in the luxury goods sector.
In November, a “Report” episode drove Moncler shares down 4.7 percent and caused the fashion brand to take legal action against the program.
At 12:10 a.m. CET, the share price of Gucci parent Kering was up 0.8 percent to 156.95 euros, or $192.43.