LVMH pilots new traceability system as Loro Piana is linked to labour exploitation
In light of the recent court cases involving two of LVMH’s subsidiaries, where workers in the supply chain had allegedly been exploited, LVMH is reassessing its supply chains across all subsidiaries.
Luxury conglomerate LVMH is piloting traceability technology across its brands as Loro Piano became the second of its subsidiaries to be placed under court administration this week.
The luxury market has been hit by a series of scandals, from labour exploitation to fake viral stories about luxury goods being made in China alongside fake goods.
The Court of Milan found that Loro Piana, which makes expensive cashmere clothing, subcontracted its production through two front firms that had no actual manufacturing capacity to Chinese-owned workshops in Italy, which the court said exploited workers.
Loro Piana Spa will undergo court monitoring for a year, according to the 26-page ruling released this week, which stems from investigations into the world of subcontracting for luxury goods in Italy that started in 2023.
Units of fashion brands Valentino, LVMH's second largest brand Dior, Italy's Armani, and Italian handbag company Alviero Martini have also been placed under administration recently.
LVMH, the world's biggest luxury group, acquired 80% of Loro Piana in July 2013, with the Italian family that founded the company retaining 20%, according to the court ruling.
Loro Piana declined to comment to Reuters. LVMH was not immediately available for comment.
In June, Loro Piana appointed Frederic Arnault, a son of LVMH chairman and Chief Executive Bernard Arnault, as its CEO.
In their statement, Italian police concluded they had closed two Chinese-owned factories, the third being a ‘paper’ company with no production capacity, and imposed a joint fine of over 240,000 euros.
One of the workers at the factories allegedly told police he had been hospitalised for over a month after being beaten for asking for his Chinese bosses for unpaid wages.
The Milan court in its ruling on Loro Piana also appointed an external administrator to verify that the company meets all the judges' demands on control of its supply chain, according to documents seen by Reuters.
The administration will be lifted earlier if the unit brings its practices into line with legal requirements, as was the case with Dior, Armani and Alviero Martini.
LVMH reassured its shareholders in its latest AGM in April that it had used traceability platform TextileGenesis to look into tracking a sample 31,000 products across key brands including Louis Vuitton, Loro Piana, Dior and Bulgari.
The system documents anything from the origin of cashmere used in Loro Piana scarves to the material sourcing for Louis Vuitton handbags.
"Traceability and transparency are the fundamental principles that guarantee the excellence of our products," Antoine Arnault, chairman of Loro Piana and head of communications and image at LVMH, told shareholders at the company's annual general meeting in April.
TextileGenesis founder Amit Gautam confirmed that demand for traceability solutions has surged since another subsidiary of LMVH owned Dior was placed under court administration last year for unethical supply chain practices.
"Brands are realising that consumers now expect verification, not just storytelling," he said. "The luxury sector can no longer assume trust based on brand heritage alone."
LVMH traceability labour exploitation Loro Piana Spa Dior Armani Alviero Martini China court
LVMH
