Socially Responsible Luxury Is Appealing

Back in the days before the crisis, when luxury was democratic and items were sold on a large scale, fashion firms exclusively targeted financial success by leveraging brands to reach new customers in emerging markets and aspirational consumers in mature ones. As a consequence, communication spending grew, matching the growth of directly-controlled points of sale (with associated fixed costs). The supply of fashion thus proliferated, with ever more products, lines and collections.
However, as the immaterial component of the brand grew in importance, a progressive banalization and cheapening of the intrinsic attributes of the fashion product proved impossible to stop. Hence the growing pressure toward the outsourcing and offshoring of manufacturing activities, with associated problems of exploitive relations with suppliers. This led to the loss of the true meaning of the supply system, a fact that was hidden to the eyes of both the trade customer and the end consumer. This phenomenon was accentuated by the fact that finance took control of several fashion brands, thereby imposing a short-term notion of business success, with financial managers taking the place of true entrepreneurs.
The economic recession has altered this trend and catalyzed a new one. In order to continue attracting clients and faced with the rival options of consumers attracted by fashion outlets or simply ceasing to buy, brands have been forced to give new meaning to the clothing and accessories they intend to sell. Fashion brands now propose new reasons for shoppers to buy their products. These are innovative and emotional, as they are linked to ethics, ecology, and experience. The new value-driven customers have started demanding not only a strong product content justifying price, but also a meaningful corporate image. This new sensibility has rewarded those fashion firms that have decided to build brand identity in a different way, by enlarging their business perspective beyond mere profitability, to include relations with all its stakeholders. For these firms, corporate social responsibility goes beyond internal business organization and institutional marketing. It's a credible strategy of positioning the brand around the concepts of business ethics, environmental responsibility and value creation for all its stakeholders.
An example of this new approach is the case of the company led by Brunello Cucinelli, which is market leader in quality cashmere garments, and embodies the made in Italy notion. The Umbrian entrepreneur has put employees at the center of business management, as he is persuaded that culture is central to the production of beautiful things. He restored the medieval village where the company is headquartered and also built a theater there. His notion of "the humanistic firm" is based on the following business model: a third of the profits go to employees (who are paid wages and salaries higher than the industry average), a third to the community, and a third is retained as entrepreneurial profit on the investment made. This approach has paid off handsomely in market terms, since the company has managed to grow during the crisis. Earnings have grown in parallel with reputation.
Thus, being a socially responsible company means to see whether the value proposition is sustainable vis-à-vis people and the environment, not being a philanthropist. A good corporate citizen worries about consumers first, which means supplying a good product in terms of the price-quality ratio, which is not only about industrial cost, but also about design. CSR thus becomes a holistic approach that provides a constant incentive for the firm to credibly behave ethically and responsibly. It is by leveraging this vision that Brunello Cucinelli is set to become a listed company in 2012.