LVMH’s recent internal audit has exposed significant shortcomings in the labour practices of luxury brands, particularly within Italian fashion houses, including Dior. The findings reveal widespread flaws in auditing systems, allowing labour violations such as exploitation and unsafe working conditions to persist within supply chains despite formal inspections.
The report highlighted a heavy reliance on third-party audits, including those conducted by Fair Factories Clearinghouse (FFC). However, these audits frequently failed to identify glaring issues. A notable example involved AZ Operations, a subcontractor for Manufactures Dior, accused of exploiting workers despite passing two environmental and social inspections in 2023. The audits, conducted by FFC and an independent auditor, failed to uncover the use of undocumented workers in sweatshop-like conditions.
The investigation pointed to systemic issues with audit processes, including limited transparency, restricted factory access, and constraints on interviewing workers. These factors enable suppliers to manipulate inspections, the report noted. It also criticised the luxury industry’s cost-reduction strategies, which rely on extensive outsourcing to external contractors. This focus on minimising costs inadvertently incentivises suppliers to exploit workers and cut corners.
Furthermore, the absence of mandatory legal requirements for supplier audits exacerbates oversight gaps. In response, LVMH has announced a comprehensive review of its direct suppliers and contractors. However, doubts remain about whether such measures can effectively address the root causes of labour exploitation in the complex and opaque luxury fashion supply chain.
Italian authorities have also launched investigations into potential antitrust violations by Dior and Armani, raising concerns about the accuracy of ethical sourcing claims made to consumers.
