rethink sustainability
Luxury watches and high-end jewellery undergo sustainability transformation – Piaget leads the way
In 2023, the luxury sector had its best ever year, with a total market value estimated at a record EUR 1,500 billion. This year, however, is likely to be marked by a growth slowdown of between 2% and 4%, attributable to geopolitical and macroeconomic uncertainty.
Regardless of short-term fluctuations, the luxury market remains in rude health. But this comes at a cost to the planet: on a global scale, the luxury sector accounts for 20% of industrial water pollution and 6% of greenhouse gas (GHG) emissions.
Industry leaders have taken matters into their own hands. But what progress has been made? And how do brands reconcile sustainability objectives with growth? Some firms, such as LVMH, Kering, and Richemont-owned Piaget, now see sustainability as a key part of building customer loyalty and future success, and are incorporating innovative sustainability initiatives into their business models.
Luxury in the face of new challenges
After two years of spectacular growth, “The luxury sector will come back down to Earth. Growth is less dynamic today, and firms will benefit less from recent price increases,” explained Gosia Eggimann, Lombard Odier Buy-side analyst, Consumer goods, in an exchange with executives at the prestigious watch and jewellery brand Piaget last spring.
Several major global trends are emerging which are impacting the sector, Gosia Eggimann said. Whereas growth in the luxury sector had previously been spurred by China: “Consumer spending is now more marked in the United States and in Europe, which are performing better than China. This is most apparent in the US, which achieved 3% to 5% growth in 2024.”
Read also: Growth prospects for Europe | Lombard Odier
The expectation of lower growth – due to declining Chinese consumer spending – is evidenced by the slight decline in LVMH sales seen in the first half of 2024. Firms in the sector also faces other challenges, explains Eggimann: “First of all, keep the growth going by maintaining exclusivity while attracting new customers.” This is especially important among the growing audience on social networks such as Instagram and Tiktok. For traditional brands such as Piaget, the social media landscape has become a priority, a place to build a new relationship with consumers.
Read also: ID Geneva transforms luxury watchmaking by circular economy
Within the luxury sector, two sub-sectors are undergoing major changes: jewellery and, in particular, watchmaking, which has a global market worth USD 46 billion (2023). “Luxury watchmaking, which is still very much dominated by Switzerland [Editor’s note: CHF 27 billion exports in 2023], is experiencing growing interest, marked by a sophisticated clientele who have in-depth technical and sectoral knowledge,” Gosia Eggimann noted.
Christophe Bourrié, Global High Jewellery & High-end Watchmaking Director of Piaget, agrees. “Today, our clients have truly become experts and have access to all sources of information. We are faced with clients who buy all brands and know both the competition and our creations.”
This is a clientele in transition – indeed, by 2025, Millennials and Generation Z will account for 70% of the global personal luxury market, prompting firms to reinvent themselves, and to secure their long-term future by committing to sustainability.
Among its Swiss peers, Piaget stands out as fully embracing this new outlook. Though the firm will blow out 150 candles on its birthday cake this year, there is nothing stale about this Swiss luxury pioneer, which continues to innovate to attract a new and more demanding clientele, while paying more attention than ever to the environmental impact of the materials it uses.
Reconciling growth with sustainability
In the luxury sector, transparent and sustainable manufacturing processes and supply chains are becoming increasingly important. “Traceability has always been at the heart of the luxury sector, today we are putting even more emphasis on these efforts,” explains Christophe Bourrié.
Piaget proves this by being a trustee member of the Responsible Jewellery Council (RJC), a world-leading organisation that sets high standards of traceability and product durability within the luxury jewellery and watchmaking sub-sectors. Today, the RJC brings together more than 1,800 businesses of all sizes and from across all stages of the supply chain, from gold and diamond mining to retailing networks.
Read also: Chopard, the jeweller who embarked on a “Journey to Sustainable Luxury”
Consumers call for sustainability
For luxury brands, these issues are now front of mind, with new laws requiring increased transparency over the materials they use and the working conditions of their suppliers. Mining, in particular, has been singled out for its environmental impact. Extracting just one gram of gold requires, on average, 1,000 litres of water, while the mercury and cyanide needed for its extraction often contaminate local freshwater sources.
Faced with this reputational risk, luxury firms such as Chopard and Piaget have committed to following the most up-to-date, sustainable and socially ethical mining processes. LVMH has committed to ensuring that, by 2026, 100% of strategic commodities are certified as having been obtained in ways that preserve ecosystems and water resources.
Where it can, the luxury sector is avoiding mining altogether – demand for recycled gold, which is much less water- and energy-intensive, continues to grow. In 2023, gold recycling increased by 9% to 1,237 tons. Since 2022, luxury brand Prada’s High Jewellery collection “Eternal Gold” has used only 100% certified recycled and traceable gold, marking the firm’s commitment to more sustainable practices.
These initiatives also respond to increasing consumer demand for more ethical production and supply practices. In 2023, a McKinsey study found that 65% of consumers are willing to pay more for products that meet high standards of sustainability, underscoring the growing interest in sustainability and supply chain transparency.
Read also: Tomorrow’s mine: the case for investing in an urgent mining revolution
The luxury sector has long been criticised for its environmental impact, but, with consumers becoming increasingly aware of the power of their spending, the tide is turning. Far from being environmental villains, the luxury jewellery and watchmaking sectors are now at the forefront of a transformation towards more sustainable and environmentally friendly practices.
The convergence of stricter regulations, innovations in alternative materials and transparent supply chains, and reputational risk, show that sustainability is no longer an option. Instead, firms are seeing that their future long-term success lies in meeting the expectations of new generations of environmentally conscious consumers, and continuing the transition to a sustainable economy that is Circular, Lean, Inclusive and Clean (CLIC®).
Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
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