Communication in Business

COMMUNICATION IN BUSINESS

Critical Essays

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Name:                                 TRAN Hoang Ha Anh

Student ID:                         18632705

Student Email:                        h.tran3@student.curtin.edu.au

Name of TA:                        Sean O’Hara

Tutorial Day and Time:        Wednesday, 2pm – 4pm

Company:                        Moet Hennessy Louis Vuitton

Semester and Campus:        Tri3A-2016, Singapore

Title:                                 LVMH’s performance – a case on social interaction

Word Count:                        1353

LVMH’s PERFORMANCE - A CASE ON SOCIAL INTERRACTION

Louis Vuitton Moet Hennessy, as well known as LVMH, is a Europe corporation was created in 1987 from two other original fashion houses: Louis Vuitton and Moet Hennessy. There are about 125,000 people working in 70 exceptional houses that belong to LVMH group, categorized in five different luxury markets: Fashion & Leather Goods, Watches & Jewelry, Perfumes & Cosmetics, Wines & Spirits and Selective Retailing (LVMH, 2016a). It was recorded in LVMH’s 2016 Q3 revenue report, lately published in this October, that the group gains sales revenue of 26,326 million Euros in 9 months of 2016. Besides various famous brands (such as: Louis Vuitton, Dior, Bulgari, Hennessy, Sephora, etc.), LVMH is also working on other activities that focus on arts sharing (LVMH, 2016b).

There is a current fact that customer, (as well as other stakeholders), demand on the business more than just providing good quality products. For instance, according to a Corporate Social Responsible report on public expectations in Poland introduced by World Bank, the responders consider company image on different various aspects like environment-friendly, law compliance, employee treatment, work condition; meanwhile only 22% that had been asked suggested about quality of product and services (Mazurkiewicz, 2005). That means the profit making process will be affected by customer’s judgment on how a company play their social role. As a world-leading group, LVMH do have their own strategy to interact to society, thus adding more competitive advantage. For instance, LVMH stated in their spirit of engaging with society, that they prioritize the sustainability and ethical responsibility in the development of their whole group (LVMH, 2016c). This essay will confine its analysis to the performance of LVMH, so that address the impact of LVMH on society (and other stakeholders in some particular case).

The Case Against Louis Vuitton Moet Hennessy

In the light of the climate change and environment effect, companies now pay more attention on sustainability. Though, looking back of what LVMH did, there was lack of particular policy and action plan declare environment as their priority.

There is an obvious example among what against the group in terms of environmental activities that LVMH’s manufactories gifted the environment huge amount of carbon dioxide (CO2). CO2 is released by daily activities of human being including production, transportation and deforestation. The Intergovernmental Panel on Climate Change (IPCC) stated in a report in 2005 that CO2 had made a rise in sea level during 20th century. They also refer in lately report that human action released about 39 billion tons of CO2 in particular year of 2013 that put the world in dangerous situation.

In the LVMH case, the group did mention the amount of CO2 emission in their annual environmental report. It was recorded that in four year, from 2011 to 2014, LVMH pumped to the air more then 120,000 metric tons CO2 every year. It even more serious in 2012 with 193,371 tons CO2 was released. Conversely, LVMH indicated this issue was on their suppliers’ duty, suggested that the whole picture was out of their control (LVMH, 2011). Furthermore, their environment policies raise arguments. Consistent with Rank a brand report updated in 2015 based on LVMH annual environmental report, they did not meet the basic requirement. LVMH did not include a goal in reducing emission, due to no tangible policy on CO2 issue.  In addition, more than 90% of their total energy consumption is not renewable

LVMH is also indicated by Rainforest Action Networks to be implicated in deforestation. The action of cutting down the tree to make common fabrics such as rayon, viscose and modal shortly links to climate pollution. Despite, LVMH did not count the CO2 emission from the deforestation they are involving.  

Talking about product materials and ingredients, LVMH face up to other problem consisting cotton sourcing and chemical usage in their product. Those issues are not only influence on environmental- friendly achievement but also considered to be involved in other aspect of social performance. For instance, Environmental Justice Foundation website stated that LVMH could be implicit in child labour issues that caught by their cotton supplier.

To sum up, LVMH is luxury brand providing various products with many manufactories worldwide. Even though all sub-brands create different type of product, they meet at one point that almost factoring activities impact on environment in the ugly way.  And it takes concern of the society and begs more attention from the company.

The Case For Louis Vuitton Moet Hennessy

Clearly, there will be enquiries if LVMH lost their reputation based on how they behaved towards the environment. As a big group of brands, LVMH noticed what they would be paid off depend on their public behavior. Therefore, the group took some little steps that drove them a pretty long way.

LVMH was aware of protecting environmental and sustainability quite early. LVMH introduced the Environmental Department since 1990s and keeps it alive over 20 years until today. Turning to 2000s, LVMH published the Environmental Charter with particular strategy to enhance their performance (LVMH, 2016d), aimed to achieve high level of environmental performance.

Back to 2015, with awareness of threat from CO2 emission to the environment and sustainable achievement, LVMH took one more step following the LIFE programme (2013) to create a carbon fund. While LIFE programme is managerial strategy, the internal carbon fund is a financial initiative (LVMH, 2016e). This step acknowledgement on how companies’ activities impact on environment, suggested as a pre-action of LVMH to deal with society concern prior to the government interference (BOF, 2015). The carbon fund charges money on amount of CO2 emission therefore forces the company reduce the emission to save money. It payback to the environment lower amount of emission, and society will be satisfied when companies eager to perform well. By contributing 15 euros per ton of CO2, 6 millions euros collected after one year will monitor to focus on renewable energy and reducing energy consumption (LVMH, 2016f)