Africa, Luxury, Power and Responsibility.

Christopher H. Cordey, is CEO of Futuratinow (futuratinow.com) a Foresight, Strategy and Capacity building consultancy and the Founding Director of the Sustainable Luxury Forum (sustainableluxuryforum.org).

In this article, he asks what role, if any, could luxury companies play in contributing to solve endemic environmental, economic and societal issues in Africa while pleasing a growing number of affluent African clients.

Today, we are at a crucial moment of history. A moment in which the human race is faced with a radically new challenge. For the first time, its prodigious dynamism collides with the limits of the biosphere.

The story is one of growth in population and consumption compounded by inadequate governance and policy responses necessary to manage this growth. The result is simply degradation of the environment and societies. Today, the collective challenge we are facing is, “How to take advantage of increased population and consumption? And work collectively to find and drive solutions to manage the negative consequences that the growth generates?"

By 2050, we will need to feed 9 billion people. Of the 2 extra billion, 40 % will be living in Sub-Saharan region and about 50 % in the Muslim world. Many people will be moving up the economic ladder toward a middle class standard of living, consuming more resources per capita.

“Luxury brands were slow to engage toward sustainable excellence & transparency; nothing changed really.”

In Western Europe, we will need to find solutions to welcome 10 times more legal (and illegal) migrants from Central Europe and the South, and lately refugees from Syria. Energy and resource shortages will continue to spark regional wars, create famine, and continue to affect the political, social, financial and economic spheres. A healthier, but aging population in the western world will require longer care and impact negatively on existing retirement and social plans.

A knowledge dependent society and free access to knowledge will continue to increase competition from low-wage countries, thus forcing companies to disrupt themselves, prototype new business models or … risk disappearing. Then, how can we collectively address these issues?

Research shows that luxury brands at large were slow – compared to other industries – to engage toward sustainable excellence.

“Tomorrow, it won’t only be about the BRICS, but also about Africa, the new luxury Eldorado”

Africa, the New Luxury Eldorado

Look south, as it won’t only be about the BRICS but also about the African continent, the new luxury Eldorado.

In the 2015 Report on Luxury Goods in Africa, KPMG stated: “Notwithstanding short-term downside risks, the rise of the African consumer’s wealth profile should continue to draw the attention of luxury brands seeking to unlock emerging and frontier market growth potential as mature luxury goods markets could no longer maintain double-digit growth.”

Indeed, aside from the “200 hidden African billionaires” (Templeton Emerging Market Group), who have most probably already established themselves outside of Africa, the real opportunity is the emergence of the new middle class throughout the continent.

But Africa, rather than just a continent, must be viewed as 54 separate and distinct countries with a wide array of political, economic, geographical, cultural, environmental and social features, challenges and opportunities.

With double-digit growth, oil, gas and resources rich countries such as Kenya, Ghana, Tanzania, and Nigeria are becoming the magnet of foreign investments. In its report, KPMG stated that Nigeria, Angola and Kenya are poised to rival the traditional luxury goods strongholds of Egypt and Morocco in the medium to long term. Other sources also mentioned Mozambique as a potentially promising market for luxury brands.

“The real opportunity is the emergence of the new middle class throughout the African continent.”

Even a single country like Nigeria – 170 million people (44% below the age of 14 years, 250 different ethnic groups, 500 languages) – “is set to post the second-strongest gain in total champagne volume, trailing France by 2016 but still has 70% of its population below the poverty line.

But across Africa, tremendous inequalities, wealth disparities, health, education, infrastructure, safety and corruption issues are to be solved; first and foremost or in parallel?

Thus, the question is how will luxury executives balance tremendous (but somehow risky) business opportunities with poverty alienation, regional famine, illiteracy or endemic health issues in an extremely poor, young but populated continent? Where lies 15% of worldwide population, 50% of which below the age of 25 years?

“How will luxury executives balance tremendous business opportunities with poverty alienation, regional famine, illiteracy or endemic health issues?”

Africa is obviously on the radar (or the historical backup like Richemont and Remgro, one of the top 10 family businesses in Africa) of several luxury brands:

• Hilton Worldwide, Protea Hospitality Group, Rezidor Hotel Group and Minor Hotel Group (MHG) announced expansion into Africa with the development of luxury resorts and hotels.
• Porsche: “The opening of Porsche Centre Lagos is an important development for the brand’s presence on the African continent. We are excited about this new venture and we look forward to developing in the Nigerian market.”
• Ermenegildo Zegna Group “There is a new focus on Africa.”
• Prada: “…We want younger generation to experience the world. That doesn’t mean spending time in places like New York, Paris, and Los Angeles. Prada needs young people who know something about Africa."
• Louis Vuitton, Ralph Lauren, Burberry, Gucci have established boutiques in western (Ghana & Nigeria) and southern Africa (Angola, South Africa).

Weak Signals

But, despite the tremendous medium term potential in these countries, how not to be concerned to monitor rising numbers of miners’ strikes in the gold sector, mainly in South Africa, without mentioning that they had to riot (and die) to get a mere salary increase from their current $500.

There are also numerous other examples where renowned high-end fashion and luxury brands have been caught engaging unethically. Browse the ethical consumer (ethicalconsumer.org) to discover the rating of famous fashion brands on various factors such as animal testing, environment, human rights, political activities or product sustainability. The results published in 2011 in the research, Style over Substance, were extremely damaging for a number of well-known designer labels such as Stella Mc Cartney, Donna Karan, Vivienne Westwood, etc.

Take the Greenpeace Detox campaign, launched in 2011 to expose the direct links between global clothing brands, their suppliers and toxic water pollution around the world. Many luxury brands, of which Valentino and Burberry had to react and commit to, following a social media storm including more than 10 000 people tweeting@Burberry to clean up their act - to rid their clothes and manufacturing process of toxic little monsters by 2020.

Or finally, take the Good Guide app (goodguide.com), a consumer tracking and rating system for beauty, fashion and apparel product. The app draws on 200 databases to help anyone find safe, healthy, and sustainable products and this for more than 50 000 products and companies.

“There are numerous examples of renowned luxury brands being caught engaging unethically”

Today

The days of awareness rising are long gone. Farsighted and progressive luxury companies are already taking advantage of ethical sourcing, traceability, product labelling, ethical certification or RFID tracking; thus addressing the greater needs of transparency of stakeholders. But what are the impacts?

For the last five years, we have monitored a growing number of progressive luxury companies engaging their organisation toward Sustainable Excellence; either starting strategic philanthropy programs or engaging their organisation in compliance exercises.

But pertaining the current economic uncertainties, coupled to weak growth in existing markets and lower pressure from civil society, the pace of investment in corporate sustainability has been frozen at some luxury brands. Business as usual?

“Should the pace of investment in corporate sustainability be accelerated in periods of economic uncertainties?”

Even more, we guestimate that 65% of luxury companies are still in the defensive phase – denying practices, outcomes or responsibilities; 30% in the compliance phase – adopting policy based compliance approach as a “cost of doing business” and about 5% in the managerial phase – embedding societal issues in their management process.

Some within the industry object that “it is not an easy task for luxury executives” (normally evaluated on sales, profit or EBIT criteria) “to deal with ethical, human rights, governance, prostitution, biodiversity, environmental damages or corruption issues; while on the same time empowering their team to design, create and market high added value goods and services”.

But how to compare their “power to influence change” with the power of Basilio Vargas, a 14-year old silver miner working in extreme conditions in the Bolivian silver mine of Potosi … just to make a living to sustain his mother and siblings?

“With tomorrow’s global economic, demographic, environmental, financial and social challenges, business is about sustainable innovation.”

What’s Next?

Five years ago, corporate sustainability was a nice to have option for luxury companies. Since then, it has become (at minima) a reputational imperative to avoid being – directly or indirectly – associated with air/soil/water pollution, genocides, unethical sourcing, civil wars, child labour and prostitution at mining zone or at tourist destination. But it goes further than just mere reputation. The highly ignitable blend of wealth divide, instabilities, inequalities, reputational and human risks mixed to the irresistible industry resilience and business opportunities in “promising but fragile countries”, should trigger forward-looking luxury executives to reassess their mid-term strategy in emerging countries, beef up their corporate sustainability engagement and resources allocation, to ultimately create lasting socio-economic positive impacts foremost in Africa, in parallels of pleasing a growing number of clients.

As in other sectors, luxury brands won’t be able to operate in Africa without ensuring that they enable communities in which they do business, to benefit, thrive and prosper as well. Even more, luxury brands, because of their aspirational values, have a much greater role to enable societal and behavioural change.

“Luxury brands, because of their aspirational values, have a much greater role to enable societal and behavioural change.”

Industry best practices, very comfortable margins, industry certification, NGO or academic support, experienced CSR specialists, dedicated training for senior or future luxury executive and specialized forum are widely available; thus facilitating the required organizational and behavioural transition to materialize.

With tomorrow’s global economic, demographic, environmental, financial and social challenges, business is about sustainable innovation, about creating sustainable competitive advantage, but also positive socio-economic impacts creation for the 99%, and particularly in the African emerging countries.

Finally, in a 2012 paper, Elegant Disruption, the author pointed out the inspiring role, but also responsibility, that luxury executives have: “If luxury executives want to continue influencing what young people dream about, then they had better take that responsibility far more seriously than the way they do now”.

All is said?

November 2015

Christopher H. Cordey | CEO Futuratinow | @futuratinow

Christopher H. Cordey (@futuratinow) is CEO of Futuratinow, a Foresight, Strategy and Capacity Building consultancy and Founding Director of the Sustainable Luxury Forum. Since 2008, he helps C-level executive to anticipate, design and influence the future. His mission is to acquaint progressive human being to development that are genuinely new & of real significance, thus helping them create lasting impacts.

He is specialized in Horizon Scanning, Foresight, Strategic Planning, Change Management and Corporate Sustainability. He also directs a MSc in Luxury Management and lectures at Kiev's International Management Institute and other international business schools.

Previously he has spent 25 years in leading general management, strategy, marketing, communication and development role in the FMCG, Luxury and Beauty industries in Asia-Pacific, Western and Eastern Europe, Central Asia and Africa.

Rule breaker |Catalyst |Unconventional |Pragmatic & Results driven. At the crossroads of #Singularity #Gamification #Luxury #Education & #Sustainability.

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