LVMH sets up an internal carbon fund to offset its emissions

Fashion is one of the most polluting industries in the world. Some companies have launched initiatives to reduce their environmental impact: Stella McCartney operates an animal product-free supply chain; Inditex has pledged to eliminate toxic chemicals from its supply chain by 2020; and H&M has launched a global clothing recycling programme.

LVMH put forward an unusual approach to the issue, and one that merits further exploration. The company has announced that it has set up an internal “carbon fund,” a company-wide piggy-bank financed by contributions from its 70 subsidiary companies. From now on, each will pay into the fund at a rate of €15 per tonne of carbon that they produce. Starting in 2016, the money collected will finance projects at LVMH whose sole purpose is to reduce the company’s emissions — for example, more energy-efficient LED and cooling equipment.

The fund creates an immediate business incentive for LVMH to become more sustainable. By effectively “taxing” itself for producing carbon, LVMH hands its fashion houses an incentive: the more sustainable they become, the less money they have to give up to the fund. The carbon fund lays out, transparently, how LVMH will raise the money it needs to invest in environmental initiatives.

That’s a big step. According to an LVMH press release: lighting, heating, air conditioning and production processes for LVMH’s activities generated 370,000 metric tonnes in 2014. That’s a huge amount of carbon — but it would have also translated to €5.55 million in the fund, going straight to projects that reduce those emissions. We need more brands to be transparent about their impact.