Report to Society | Chanel Flipbook
This report is a first insight into who we are and how we operate. It is a platform for a different kind of engagement, both internally — with our employees —and externally, with our stakeholders.
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REPORT TO SOCIETY
IN THIS REPORT STRIVING TO A HISTORY OF SETTING BE EXEMPLARY THE TREND FOR LUXURY PAGE 2 PAGE 4 OUR BRAND CHANEL PURPOSE TODAY PAGE 7 PAGE 9 A A A CREATION-DRIVEN COMMITTED HUMAN-DRIVEN BRAND LUXURY LEADER COMPANY PAGE 15 PAGE 37 PAGE 49 GOVERNANCE FOR RESPONSIBILITY AND CSR SUSTAINABILITY GOVERNANCE PAGE 67 PAGE 70
REPORT TO SOCIETY CHANEL’S ROLE IN SOCIETY CHANEL, a privately owned company for more than 100 years, has traditionally been very discreet about its business. We have principally devoted our communications to showcasing our products and their creators, a discretion which has contributed to a sense of mystique around the brand. Today, however, all stakeholders expect greater transparency and accountability from companies. We want to share in more detail how CHANEL operates, the commitments we have made as a company, and how we collaborate with civil society, with external stakeholders, and with other brands on sustainability issues. This report is a first insight into who we are and how we operate. It is a platform for a different kind of engagement, both internally — with our employees — and externally, with our stakeholders.
INTRODUCTION STRIVING TO BE EXEMPLARY CHANEL IS FIRST AND FOREMOST CHANEL’s internal mission is to maintain the ABOUT CREATION. IT’S ALSO conditions in which creation thrives, believing ABOUT BEING A PROFOUNDLY that creativity and beauty are essential drivers of progress. CHANEL also believes that by HUMAN-DRIVEN COMPANY providing the enabling environment for COMMITTED TO CREATING creation, we can be a positive force for change LONG-TERM VALUE FOR THE in the world and contribute to transforming BRAND AND FOR SOCIETY. lives and societies. Since the beginning, CHANEL has always tried to develop the long-term value of the CHANEL has always been a pioneer of brand. As a company, we recognized early modernity, defining trends in luxury and on that we can only secure this outcome if, at beauty for more than 100 years. It is a company the same time, we contribute long-term value seeking to constantly reinvent itself, embrace and sustainability to the environmental and innovation, and challenge existing boundaries social ecosystems in which we operate. At a through its creativity. CHANEL, following the time of unprecedented social, economic, and legacy of our founder, assumes an influential environmental transformation, we think we role in society and strives to be exemplary have to continue to step up our ambitions and in everything we do. commitments. In this way, we can contribute to a future that creates value for both business and society in a mutually beneficial way.
THE WAY CHANEL CREATES LONG-TERM VALUE IS BASED ON THREE PILLARS, ON WHICH THIS REPORT IS STRUCTURED: A CREATION-DRIVEN BRAND How CHANEL is building greater resilience to ensure creation is always possible. PAGE 15 A COMMITTED LUXURY LEADER How CHANEL is working toward building a more sustainable business model for luxury. PAGE 37 A HUMAN-DRIVEN COMPANY How CHANEL is empowering people, promoting self-accomplishment, and enabling working conditions that respect and enhance the potential of each individual. PAGE 49 Using our influence and our ability to think, we recognize we still need to progress toward act, and invest for the long term, CHANEL fully managing all our social and environmental believes that we can secure the brand’s future impacts. At every level of the company, there and contribute to shaping a better world is a clear commitment to engaging the human, for everyone. Our ambition is to engage on creative, and financial resources needed a journey toward exemplarity. While we are to effect long-term positive change. This proud of what we have achieved to date, commitment is made possible by CHANEL’s independent, private ownership structure.
INTRODUCTION A HISTORY OF SETTING THE TREND FOR LUXURY The House of CHANEL was founded by a unique, powerful, atypical woman. By shaping her own world, Mademoiselle Chanel influenced the entire world around her, fundamentally changing perceptions of style for everyone. 1909 1921 CHANEL BEGINS o UNVEILING OF CHANEL N 5, Gabrielle Chanel opens a shop at CREATED BY ERNEST BEAUX 160 boulevard Malesherbes in Paris. 1910 1924 1932 Gabrielle Chanel opens her first Gabrielle Chanel launches her Gabrielle Chanel presents the independent millinery shop at first makeup collection and, Bijoux de Diamants exhibition 21 rue Cambon in Paris. in the same year, founds the of fine jewelry, the first time Société des Parfums CHANEL, a couturier presented a dedicated to creating unique high- high-end jewelry collection. end fragrance and beauty products. 1955 1926 Launch of the 2.55 quilted Gabrielle Chanel creates handbag, which introduced the daringly simple “little black a new style of shoulder strap dress,” a true revolution in the that allows a woman’s hands fashion of the time. to remain free. 1927 1957 CHANEL develops its first line Gabrielle Chanel creates of skincare products. the slingback shoe. “IF Y OU WERE BORN WITHOUT WINGS, DO NOTHING TO PREVENT THEM FROM GROWING.” — GABRIELLE CHANEL
Since 1909, our entire business model has been designed to create and safeguard the conditions for creativity to thrive. Everything we do as a company is intended to support, enable, and feed creativity: the way we run the business, how we measure performance, our care for our people, and the way we protect and preserve our savoir faire. The history of CHANEL has always been one of disruption, of daring to think and act differently, of creating new trends. Here are some key examples of how CHANEL has set the trend for luxury over the past 100 years: 1978 2011 THE HOUSE OF CHANEL EXPANDS FONDATION CHANEL CHANEL introduces its first Ready-to-Wear collection CHANEL launches Fondation CHANEL and the worldwide distribution of its line of accessories. to support women as agents of social change throughout the world. 1981 2013 Jacques Polge is named CHANEL opens an extension in director of the Laboratoire Parfum Pantin, one of the most modern de CHANEL, following in the research centers in cosmetics. footsteps of Ernest Beaux and Henri Robert. Following the retirement of his father, Jacques, Olivier Polge 1983 becomes the director of Fragrance Karl Lagerfeld is appointed artistic Creation and Development director for CHANEL FASHION, for CHANEL. designer of all Haute Couture, Ready- 2016 to-Wear, and accessory collections. 1993 Through the launch of La MONTRE The first CHANEL fine jewelry MONSIEUR, CHANEL unveils its collection launches in first watch with a movement Place Vendôme, Paris. designed and manufactured completely in-house. 2000 2017 CHANEL launches the J12, the first watch with a case made out CHANEL launches the new of black ceramic, a high-tech GABRIELLE CHANEL FRAGRANCE material inspired from the field and GABRIELLE HANDBAG. of aeronautical engineering. 2002 Through its subsidiary Paraffection, 1987 CHANEL acquires eight traditional The first line of CHANEL Watches Parisian fashion ateliers, creating launches the PREMIÈRE WATCH, the Métiers d’Art show. designed by Jacques Helleu.
INTRODUCTION OUR BRAND PURPOSE The House of CHANEL was founded by a unique, powerful, atypically feminine soul who was propelled by her very core. By determining her world, she influenced the world, fundamentally changing perceptions of Style for everyone. We embrace the epic modernity of our rich heritage and fulfill its vision by serving today’s self-powered woman who creates her destiny. Our DNA is in everything we make, and elevating women, treasuring their complexities and facets, is in our DNA. Our repertoire spans the extremes that allow a woman to find and express her essence, and thus offer her the invaluable experience of a liberating transformation, whether with a dash of lipstick, a spritz of perfume or a total look. From its inception, our House has been a seminal force in shaping the codes of fashion. By drawing on the potency of paradox, and reconceiving it in surprising, harmonious, resonant design elements, we have forged for ourselves the enduring aura of singular magnetism.
INTRODUCTION CHANEL TODAY CHANEL is a French brand and an international business for luxury-goods consumers, organized as a global matrix structure on three activities, across three regions. The three activities are (i) FASHION, (ii) The operating profit amounts to $2,692 million FRAGRANCES & BEAUTY, and (iii) WATCHES with free cash flow of $1,628 million this year & FINE JEWELRY. They define our brand allowing the company to invest $1,457 million strategy, the products we develop, and the in brand support activities to deliver our creation communication tools around them. and innovation strategies, up 15 percent compared to 2016. CHANEL’s long-term We operate across multiple geographies in strategy is underpinned by a strong balance the Americas, Europe, and Asia, where local sheet, with net debt of only $18 million. markets are responsible for implementing the brand strategy, coordination, and product distribution. 110 As a part of modernizing and simplifying our organizations, we have established a Countries common holding company in London that will consolidate all CHANEL companies. The majority of our global corporate functions are based in London. CHANEL’s sales in 2017 20,197 continued to be strong and stand at $9.6 billion, up 11 percent compared to 2016 on a constant Employees currency basis, with growth in all regions.
INTRODUCTION A LONG-TERM PERSPECTIVE CHANEL’s performance is always measured not by shareholder equity, but by brand equity. Everything we do is aimed at protecting and enhancing the long-term value of the brand, independently of short-term financial results and/or market constraints. Looking at long-term brand equity is how we measure our success and how we make decisions. “PERF ORMANCE IS NOT Being a creation-driven brand, committed JUST ABOUT SHORT-TERM luxury leader, and a human-driven company FINANCIAL RESULTS, is made possible through our long-term perspective. BUT ABOUT LONG-TERM CREATION OF VALUE.” This long-term perspective gives us the ability to help drive positive change. It gives us the — PHILIPPE BLONDIAUX possibility, and the responsibility, to use GLOBAL CHIEF FINANCIAL the power of our creativity, our people, and OFFICER, CHANEL our influence, to think, plan, and act with society’s and the planet’s long-term interests in mind, as well as our own. This long-term vision for our performance is Operating in this way means we can work the most important element of our business with suppliers over generations to ensure the model, and is based on our complete financial resources they provide are well managed and independence. Being a wholly privately benefit the community in its entirety. It means owned company with a strong cash flow, an we can protect rare skills that may otherwise extremely sound balance sheet structure, and die out. It means we can invest in future very little debt affords us total independence energy sources that not only serve us, but in financing all of our strategic investments. also, others who need them. These and many more examples in this report show what our Operating without short-term financial specific approach can enable us to achieve. constraints gives us the freedom and the luxury to make the right decisions for our brand.
INTRODUCTION Within our FRAGRANCES & BEAUTY activity, HOW WE MEASURE BRAND EQUITY we have built in-house creative teams and In order to measure brand equity, we carry out annual designers in Paris; integrated research and studies of consumer perceptions of our brand. Each development activities in Paris, New York, study takes into account a large number of consumers and Tokyo; and fully owned production across all of our key markets. facilities north of Paris. Our focus on the long term means we can take a slower, The studies analyze brand perception according to more deliberate approach to new product detailed criteria such as saliency (brand awareness), development. The fragrance market is highly value (what qualities the brand represents for competitive, driven by hundreds of new consumers), strength (to what extent the brand is product launches every year. However, we loved by consumers), and desirability (to what extent do not believe this rhythm of new product the brand is “for me”). launches is sustainable for the CHANEL The company has conducted brand equity studies brand over the long term. For this reason, for over 25 years. The results are analyzed in detail we introduce new fragrance products, on each year and discussed among the brand’s top average, every 10 to 12 years. This ensures management, laying the foundation for our key we have sufficient financial and human strategic decisions. resources to build our brands over the long term. For example, we launched the new GABRIELLE CHANEL FRAGRANCE 12 years after COCO MADEMOISELLE. The result of We have been able to make some significant this long-term brand vision is that we have investments for the long term over the last three brands in the top five worldwide. few years across all our activities. Focusing on the long term has also meant we Upstream in the FASHION activity value chain, can deliver products that are both desirable for example, we have invested in a number and sustainable for our customers. of manufacturing and production sites. One aspect central to the development and These are essential for CHANEL, but also growth of our WATCHES & FINE JEWELRY for the luxury sector as a whole, to thrive — activity has been the consolidation of all from the footwear manufacturer Roveda aspects of watch and jewelry making. in Italy to the Bodin-Joyeux tannery in France and the cashmere producer Barrie Knitwear Investing in our own horological manufacturing in Scotland. capabilities in Switzerland and an integrated fine-jewelry workshop on Place Vendôme All these production companies are part was a strategic decision that strengthened of an ecosystem, one we have created for our authenticity. the European luxury-fashion industry to deliver outstanding creations, but also one that enables us to ensure the long-term sustainability of specialist industries that might otherwise disappear.
A LONG-TERM PERSPECTIVE In 2016, we launched La MONTRE MONSIEUR, We are also building a long-term partnership the first CHANEL watch with a movement with Palais Galliera as the exclusive sponsor, designed and manufactured completely responsible for financing the construction of in-house. Structured around a single circular new exhibition rooms. The Palais Galliera will bridge that connects all the elements of the become the first permanent fashion museum movement, we created it through an artistic in France and contribute to promoting both and investment haute horlogerie partnership fashion and Paris by making its exceptional with independent watchmaker Romain Gauthier. fashion archives accessible to all. Downstream, we are investing significantly for the long term in the client experience, working THINKING LONG TERM THROUGH out how best to embrace digital innovation in OUR PRICING STRATEGY a way that maintains both the exclusivity and In 2015, we were the first in our industry sector to quality of the overall CHANEL experience. introduce worldwide price harmonization for handbags. Our strategy is to increasingly personalize This decision was made in order to reduce price client service and experiences while differentials that may have existed across markets maintaining our long-term commitment to and in order to offer our products to all of our clients physical retail boutiques, which are an integral at a harmonized price, regardless of location. part of how our clients interact with CHANEL. Our value chain is part of a much broader Our strategy was a bold one initially, but it was a luxury system, which must continually be move in favor of our customers. For them, and purely nourished, protected, and supported. out of fairness, it was no longer acceptable for us For example, earlier this year, we announced to allow significant price differentials to develop. sponsorship for two projects that will support We were courageous first-movers in this matter and Paris’ position as the home of fashion. First, are satisfied with how our strategy has played out: we will invest €25 million in the restoration The resale market has decreased, the traffic in our and renovation of the Grand Palais, a symbol boutiques is clearly more balanced, and we have the of architectural innovation in Paris since opportunity to better serve our clients and create an its creation. CHANEL and the Grand Palais experience in line with our standards of excellence. have developed a close bond, initiated by Karl Lagerfeld in 2005. The exceptional nave of the Grand Palais is the location of many elaborate Haute Couture runway shows, and an iconic building that truly represents Paris.
REPORT TO SOCIETY A CREATION-DRIVEN BRAND Creation is at the heart of our brand. It makes our products desirable, and the experiences we provide to our clients, unique. In an era of ubiquitous global communications, the power of creation is a source of aspiration and inspiration for many. Creation builds and spreads beauty far and To make this a reality, CHANEL invests heavily wide, and inspires many people all over the in preserving the sources of creation in the world beyond our immediate clientele. following ways: We believe we have a responsibility to maintain the conditions that allow creation to thrive, so Valuing and securing the extraordinary we give it the potential to be a positive force and rare raw materials that we use for change in the world, and to contribute in our products, and protecting complex to transforming lives and societies. and fragile ecosystems. Protecting and developing the incredible skills and traditions of our artisans, whose métiers belong to the cultural heritage of humanity but would probably disappear without our support. Supporting relevant new technologies that add value to our products and to the way we produce them.
A CREATION-DRIVEN BRAND NATURAL RAW MATERIALS OF EXTRAORDINARY QUALITY CHANEL’s creation relies on our ability to continue to source natural ingredients and materials of exceptional and unique quality. The extreme care we take in choosing and preserving such extraordinary quality is part of our heritage. Many of our materials come from regions MATIÈRES NOBLES with environmental and social challenges. Each of our business activities uses materials We need to secure these materials for the of critical importance to our creations. These long term, and we also have a responsibility matières nobles are the materials that make to set an example. For these reasons, we CHANEL products the iconic creations they invest in addressing these challenges as part are today. In many cases, CHANEL benefits of our supply-chain resiliency strategy. from exceptionally close, long-standing As part of this strategy, we distinguish between relationships with the suppliers who provide strategic raw materials — “matières nobles” — us with the essential strategic raw materials and other raw materials, which are more and ingredients for our products. generic commodities.
A CREATION-DRIVEN BRAND For decades we have focused on supporting Following are some examples of our projects the complex environmental and social aiming to achieve positive social, economic, ecosystems from which we source the matières and environmental impacts: nobles for our perfumes and cosmetics. Over 15 years ago, to build on our experience in ENHANCING SCIENTIFIC Grasse, we started extending our supply- SKILLS IN BHUTAN chain resiliency approach to other strategic In 2014, the CHANEL FRAGRANCES & BEAUTY raw materials, with projects such as one in R&D team identified a native plant in Bhutan Madagascar for vanilla. Given the number of with high cosmetic potential. As envisaged raw materials we source, and the number of by the Nagoya Protocol on Access to Genetic suppliers we source them from — more than Resources and the Fair and Equitable Sharing 300 for our FRAGRANCES & BEAUTY activities of Benefits Arising from their Utilization to 1 — the challenges we face are incredibly the Convention on Biological Diversity, we diverse. They vary according to the country worked with local stakeholders on an access and raw material in question. At the source scheme, and established a partnership with of our proprietary natural ingredients supply the Bhutanese Ministry of Agriculture and chains, we commit to promoting and deploying Forests and its National Biodiversity Centre. the principles of regenerative agriculture: One of their key needs was to enhance the a system of farming practices and patterns level of local scientific skills. We agreed on a that actively enrich soils, biodiversity, and training plan, welcoming Bhutanese scientists ecosystems, while increasing the livelihoods to our laboratories in Pantin, France, to of individual farmers. While we have achieved conduct, with our support, their own research a number of positive social, economic, and on the value of Bhutanese biodiversity. We also environmental outcomes, we still have work to supported their application for a United Nations do to be certain all our raw-material sourcing Development Programme (UNDP) grant so the achieves positive impacts in line with the National Biodiversity Centre of Bhutan could Sustainable Development Goals (SDGs) of set up a lab with high-performance liquid- the United Nations. We are convinced of the chromatography instruments. Two CHANEL potential that regenerative agriculture holds scientists went to Bhutan to set up the for transformative change toward reaching our instruments and train the local research team objectives. Promoting regenerative agriculture on them, while we trained Bhutanese students is a key part of our strategy going forward. in our laboratory for analytical chemistry. 1. The Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilisation to the Convention on Biological Diversity (the Nagoya Protocol) is an international agreement that aims to share the benefits arising from the utilization of genetic resources in a fair and equitable way.
NATURAL RAW MATERIALS OF EXTRAORDINARY QUALITY With the adoption of the UN SDGs in 2015, we recognize that best practice means linking project-level impacts to material sustainable- development goals and local indicators. For Bhutan and other markets in Africa, Asia, and South America where we source our natural raw-materials, we have defined a method for devising relevant and appropriate projects at raw-material origin. Our ambition is to set the trend in terms of corporate accountability for sustainable development in these areas and to share our approach with others. PRESERVING GROWING TRADITIONS IN COSTA RICA In Cerro Azul, Costa Rica, our suppliers cultivate approximately three tons of green coffee a year, using traditional methods, for our skincare products. In 2015, we carried out a study that highlighted a number of issues — one being that due to cheaper production methods in other countries, coffee in the region became far less profitable. Local producers were abandoning coffee and even moving away. The population of Cerro Azul fell from 2,500 to around 1,000 in just over 25 years. To address this, and help preserve coffee-growing traditions in Cerro Azul, we set Due to this close alignment with our up a supply-chain resiliency plan. We financed sustainable sourcing strategy, we signed a a new coffee-roasting unit to encourage the three-year renewable framework agreement production and sale of locally roasted coffee. for sustainably grown plant-based raw This increased the coffee’s purchase price materials. This provides visibility and financial and helped restore profitability. security for the business, while allowing CHANEL to benefit from their extensive Working with a local social-business company, agroecology and social expertise. we also developed an innovative social- entrepreneurship model for the sustainable development of vulnerable rural communities, using local resources and know-how in ingredient production.
A CREATION-DRIVEN BRAND INVESTING IN SUSTAINABILITY Working with local authorities, our support IN NEW CALEDONIA also contributed to reducing illegal exploitation Sandalwood extract is used as an ingredient by establishing controlled woodcutting zones. in many perfumes, including several CHANEL At the same time, we engaged with local Kanak fragrances. Although India has been our communities to resolve potential tensions and source of this ingredient for many decades, address economic concerns. We also set up its overexploitation in the country, due a number of associated conservation projects to its excessive use outside the perfume to protect indigenous plants and animals, industry, had led to severe deforestation. including rare butterfly and lizard species. In 2010, CHANEL decided instead to buy all sandalwood from New Caledonia, an OTHER RAW MATERIALS island territory in the South Pacific. While Where we don’t fully control other raw New Caledonia has extensive resources materials we use in our products, we follow of sandalwood, the supply chain faced a another strategy, which includes the combination of environmental, social, and following elements: economic risks. There was no regulation or control of sandalwood harvesting there, raising • Traceability: We try to trace the structure the threat of deforestation. Sourcing activities and composition of the supply chain to as risked disrupting local Kanak communities, close to the material’s origin as is possible. whose economies and cultural heritage • Audits: We assess and monitor the actual depended on sandalwood exploitation. and potential risks and impacts on the Since 2015, increased global competition, welfare of humans, animals, and natural caused by weakened global markets, had ecosystems. led to an intensification of illegal woodcutting in the area. • Remediation: We set up programs to remediate local environmental and social To ensure the long-term sustainability of impacts wherever possible through sandalwood in New Caledonia, we developed long-term cooperation with suppliers a supply-chain strategy involving three key and local communities. components: a breeding, conservation, and reforestation program, the control of wood exploitation, and a strong engagement with local communities. The sandalwood program aims to conserve 75,000 sandalwood trees in their natural habitat. For every tree cut in the conservation area, five new trees are now transplanted to and cultivated in the sandalwood nursery of our Kanak partner.
NATURAL RAW MATERIALS OF EXTRAORDINARY QUALITY In many cases, gaining greater visibility of PALM OIL: USING A RECOGNIZED all stages of our raw-material supply chains SUSTAINABILITY STANDARD can be difficult. This is especially true for the CHANEL is a relatively small user of palm oil, commodities we use in some of our products. yet, like most beauty-product producers, In these instances, we can take the initiative we do use derivatives of it in our cosmetics. to design and set up our own supply chain We use around 130 derivatives of palm oil in order to ensure full traceability and control, and palm kernel oil as raw materials, from as in the case of our beeswax supply chain 50 suppliers — the total amount being about in France. Where appropriate, we also use 300 tons a year. All the derivatives we use are materials which are certified to a recognized certified to the Roundtable on Sustainable sustainability standard. Palm Oil (RSPO) standard. There are many environmental issues linked to palm oil For example, we have achieved COC production, including deforestation, loss Responsible Jewellery Council (RJC) of wildlife habitat, and even climate change. certification, and we use certified palm oil So, despite the relatively low volume we derivatives. Where supply chains are highly use, we know we need to work on tracing complex and lacking in traceability, and where the supply, and ensuring none of our buying recognized sustainability standards do not contributes to these issues. exist, we try to work in association across sectors, with private, public, and nonprofit To understand this better, CHANEL parties that are trying to achieve responsible commissioned a third party to conduct a supply chains. This is the case with mica, traceability study of our supply chain for palm for example, through the Responsible Mica oil derivatives. This helped us trace 81 percent Initiative (RMI). of our products to the refineries, 75 percent to the mills, and 16 percent to as far as the The objectives of such initiatives focus on plantations. We have identified 58 refineries, increasing traceability, and ensuring fair 23 crushers, and 1,180 mills potentially and sustainable conditions for production connected to our supply chain that have risks or mining. This helps communities and related to deforestation and wildlife issues. governments build a legal framework and achieve acceptable standards. We will now move on to the second step of our traceability program by connecting these results with our sustainable-sourcing approach. We will talk to a selection of our palm oil derivative suppliers about planning and running resiliency projects along our value chain. In addition, since 2015 we have been trying to develop, with a local NGO, our own source of palm oil in Ghana to supplement our needs. Here we will have full traceability and better control over the social and environmental impacts.
“ WE ARE L UCKY TO HAVE WORKSHOPS AND SUPPLIERS WHO KNOW HOW TO DO EVERYTHING. WE NEED PEOPLE WHO POSSESS A KNOWLEDGE OF TRADITIONAL SAVOIR FAIRE. IF CHANEL HADN’T BOUGHT ALL OF THESE ‘MAISONS,’ I DON’T KNOW HOW WE WOULD MANAGE. WHAT I LIKE IS THAT I HAVE THE POSSIBILITY TO CREATE IN THE BEST CONDITIONS WITH THE BEST PEOPLE. IT’S AN ENORMOUS LUXURY.” — KARL LAGERFELD
A CREATION-DRIVEN BRAND SAVOIR FAIRE Creation at CHANEL relies on savoir faire. Throughout our history, we have set the trend for collaborating closely with artisans whose exceptional craft skills have been honed and inherited over many decades. By acquiring and investing in houses of traditional expertise, and forming partnerships, we are helping safeguard this cultural heritage in our supply chains wherever we can, preserving and developing savoir faire for future generations. Savoir faire is one of the most vital conditions Our WATCHES & FINE JEWELRY activity for creation at CHANEL, and an inseparable depends on the expertise of our traditional part of our cultural heritage. Our creativity French jewelry workshop, the High Jewelry is a direct result of a continuous dialogue Vendôme Atelier. The perfumes our between our in-house creators and highly FRAGRANCES & BEAUTY activity creates skilled craft practitioners working in a range are developed through our close association of traditional professions. Savoir faire plays with flower growers from the historic a role throughout our business, and across perfume-making region of Grasse, in the all our activities. South of France.
SAVOIR FAIRE Within our FASHION activity, we have built a For the past 15 years, we have invested steadily team of dedicated couturiers who are working in the Maisons d’Art, building a portfolio of to bring the creations of our designers to life. companies, under Paraffection, which means In addition, our FASHION activity maintains “for the love of.” By acquiring and investing close creative partnerships with the Maisons in businesses in this way, both sides benefit. d’Art: workshops practicing traditional crafts The investment provides the cash flow and such as embroidery, millinery, and shoemaking. professional managerial support for the Some of CHANEL’s most iconic FASHION workshops and houses to innovate new pieces, such as the two-tone shoe and the tweed techniques, as Causse Gantier, Tanneries Bodin- jacket, were created though Gabrielle Chanel’s Joyeux, Mégisserie Richard, and Tanneries Haas personal collaborations with historic Parisian have done in tanning. It also enables them to maisons, such as the shoemaker Massaro recruit and train skilled artisans. The workshops and the embroiderer Lesage. By entering and houses retain full creative independence and CHANEL’s circle of creativity, the artisans bring the ability to supply other luxury houses and/or the intelligence and spirit of craftsmanship, create their own product line (as is the case magnifying CHANEL’s creations by with Maison Michel and Goossens). At the Karl Lagerfeld. same time, CHANEL is directly connected to the source of inspiration and craftsmanship SAFEGUARDING SKILLS, that fuels creativity. PRESERVING INDEPENDENCE Changing market forces — such as the relocation of manufacturing to emerging markets, and a dwindling pool of talent — pose a major threat to the Maisons d’Art and to the irreplaceable skills and knowledge they possess. CHANEL was the first company to recognize the importance of acquiring and investing in businesses that possess these rare capabilities, while maintaining their independence and ability to work with other brands. Through the Maisons d’Art, CHANEL ensures that our entire industry has access to the fine craft skills on which our business depends. maison LESAGE EMBROIDERer
CHANEL’S MAISONS D’ART MAISON LEMARIÉ FEATHER AND FLOWER MAKER MAISON MICHEL HATMAKER MAISON MASSARO SHOEMAKER MAISON LESAGE EMBROIDERER GOOSSENS GOLDSMITH ATELIER MONTEX EMBROIDERER PALOMA MANUFACTURER CAUSSE GANTIER GLOVE MAKER MAISON LOGNON PLEATER A.C.T. 3 TWEED PRODUCER
SAVOIR FAIRE Maison Lesage, which became part of the We don’t intend to fund our acquisition House of CHANEL in 2002, is known and forever. Our aim is to help the Maisons d’Art recognized worldwide as the guardian of build economic resilience over time, so they embroidery art: a savoir faire both exacting eventually develop into sustainable, fully and precious, requiring patience, attention independent businesses with strong long- to detail, and creativity, which has now term potential. This is all part of the unique become rare. perspective we bring and our desire to create a virtuous circle: one that benefits the artisans, Since 1992, the Maison Lesage has been their communities, CHANEL, and the luxury imparting its knowledge and techniques in industry as a whole. It is a way for CHANEL its prestigious Parisian school. Thousands of to contribute to the role of luxury as one students from around the world have chosen of the main contributors to the cultural to study the many Lunéville hook and needle and creative industry. techniques taught at the Lesage school. Instruction is provided by Maison Lesage embroiderers, and is accessible to all, from beginning to advanced students, as well as those wishing to receive professional training. On average, the school of Maison Lesage offers 400 students per year a chance to discover a unique craft, which involves learning embroidery techniques and transforming skills into a passion to be used in Haute Couture or interior decoration.
A CREATION-DRIVEN BRAND INNOVATION — CREATING VALUE FOR SOCIETY In a rapidly changing world, CHANEL needs to constantly anticipate society’s expectations so we can develop new ideas that will help sustain our business over the long term. Experimentation and innovation have been on more sustainable production processes, driving forces throughout our history. We are or creating our own watch mechanism. able to reinvent ourselves continually to adapt The aim is that our innovations bring real to change in society. Innovation for CHANEL value to the consumer or society. is about harnessing that dynamic legacy so we can protect our business from the challenges More than other luxury brands, CHANEL plays tomorrow presents. We do not innovate for with the tension between heritage and novelty, the sake of it. Innovation needs to be at the savoir faire and innovation. This perspective service of creation, whether that’s in relation is inimitable, and the paradox is typical of our to improving cosmetic formulas, using new brand identity. materials in our FASHION creations, working
A CREATION-DRIVEN BRAND OUR APPROACH As a result, it designs new technologies, both How does CHANEL innovate? By bringing in-house and with external partners, for the together both complementary and contrasting production of plant-based active ingredients, areas of expertise, by developing a quick-thinking all the while assessing formulas for safety management approach, and by creating and ecological responsibility in order to be synergies that allow us to push the boundaries at the leading edge of new thinking and of creativity in bold, unexpected ways. practice. CHANEL has a specific team whose role is to integrate CSR within the R&D function We’ve been able to marry traditional savoir in order to foster sustainable innovation at faire craft skills with cutting-edge technologies, the core of the development process for our resulting in highly innovative pieces, for beauty products. example, a 3D-printed CHANEL jacket created NEW TECHNOLOGIES FOR PLANT- by Maison Lesage. BASED ACTIVE INGREDIENTS: At the corporate level, we have created a For more than 10 years, the Pantin laboratory dedicated innovation practice to accelerate has developed some 60 active natural our ability to rapidly test, learn, and drive ingredients from state-of-the-art extraction and long-term innovation designed to future-proof cultivation processes and continues to explore CHANEL. An experimentation engine, the new techniques to create the active ingredients practice focuses on future-forward solutions of tomorrow. The laboratory is at the forefront that are transversal within CHANEL and take of new green technologies, designed to be a 5+ year perspective. Its strategic areas of more respectful of the environment. focus are designed to help ensure all our clients and employees continue to truly feel Among the processes developed by the Pantin and experience the CHANEL difference. teams, the polyfractionation (PFA) process uses molecular-distillation technology, making Today, the innovation process is also firmly it possible to obtain the active agents specific established in each activity. In this way, we to our skincare lines. This flash distillation unearth new ideas and potential avenues for process, carried out within a vacuum at low the business to follow so our model can evolve temperature, allows us, in a few seconds, to along a more sustainable path. Following are extract active molecules while preserving some examples of this in practice through their essential qualities. Originally used for our Pantin lab. the development of the vanilla active PFA for our Sublimage product line, this technology PANTIN LABORATORY: LEADING has been used subsequently for the ginger INNOVATION IN COSMETICS PFA in the Hydra Beauty product line, and CHANEL opened is first cosmetic lab in 1976 recently to extract the active ingredient from in Pantin, on the outskirts of Paris. The Pantin the green coffee oil used in our BLUE SERUM. site employs more than 180 scientists, from biologists to ethnobotanists, from chemical analysts to toxicologists, from chemists to process engineers, and from evaluations experts to molecular biologists.
INNOVATION — CREATING VALUE FOR SOCIETY The Innovation and Materials Development Laboratory is also working to develop LONG-TERM EXPERTISE IN HEALTHY SKIN innovative techniques for producing active CHANEL FRAGRANCES & BEAUTY is dedicated to ingredients in partnership with start-ups. creating the best cosmetic solutions for women in the world. To do so, for over 25 years, CHANEL has been For example, the laboratory collaborated running a long-term research program to understand with Oléos to develop a less intense extraction healthy skin and beauty for women. This program method using the physical processes of aims at better understanding the crossed impact of microwaves combined with ultrasound. Thus, environmental factors, lifestyle, and genetics on the for the camellia, polyphenols are extracted skin’s appearance and comfort. We can capitalize on from white camellia flower petals in camellia these long-term studies in order to develop the most oil. After filtration, this oil, enriched in appropriate cosmetic solutions for women. polyphenols, is used in the Hydra Beauty product range. More recently, one of the three To reflect the huge diversity of women around the active ingredients of our BLUE SERUM was world, studies were carried out in different countries developed using this process. in collaboration with local research centers including in China (700 women from Beijing, Shanghai, In addition, our collaboration with Plant Guangzhou, and Hangzhou), in India (800 women Advanced Technologies, a plant biotechnology from Mumbai), in South Africa (300 women from start-up from the Lorraine region of France, Pretoria), the U.S.A. (450 Latin-Americans and, made the cultivation of plants in aeroponics 250 African-Americans), and over 6,000 women from possible. This new approach to above-ground different ethnical backgrounds in France. The results plant cultivation makes it possible to control were shared and co-published, enabling us to create the ecosystem of the plant by providing it a database of 37,000 high-quality images of women’s with all the nutrients it needs to develop fully. facial- and skin-health data while always complying By stimulating a plant’s natural defenses, we with the highest regulatory and ethical rules around are able to trigger the production of active data privacy. molecules that will be harvested through the roots as they are immersed in a natural solvent. CHANEL is also a partner in major health and aging The process, called “PAT plant milking®,” now national research programs both in France (SU.VI.MAX makes it possible to produce natural active study on over 13,000 men and women) and Japan substances without damaging the plant. This (Nagahama study on over 10,000 men and women). technique was used for the first time in the world by CHANEL for the production of the These long-term studies aim to better understand star active ingredient of the Le Lift product women’s health and how their bodies age with time. line, Edulis Morning Glory. They are our contribution to a better understanding of aging in skin and appearance as a part of CHANEL also uses specific partnerships in the human health. development of raw materials. In its makeup line, for example, CHANEL FRAGRANCES & BEAUTY co-developed a red plant pigment with the Regional Centre for Innovation and Transfer of Horticultural Technology in Rochefort-sur-Mer: the sappan wood, used in the product range of ROUGE ALLURE lipstick.
INNOVATION — CREATING VALUE FOR SOCIETY PARTNERING FOR INNOVATION This partnership is co-funded (50–50) by No business will find all its new ideas CHANEL and the Austrian government internally. It requires collaboration. We search (Federal Ministry for Digital and Economic for excellence and inspiration in product Affairs). Through this partnership, CHANEL is development and customer service outside committed to financing academic research to of our business via the following methods: increase public knowledge on skin health and skin aging, and provide innovative and efficient • Financing academic research partnerships: skincare solutions for women. We work with leading academic institutions worldwide in the field of cosmetic formulas. This work resulted in the following: • Encouraging suppliers to innovate: We work • 42 scientific papers published in renowned with our suppliers to produce new, more international scientific journals. environmentally friendly creations at scale. • One patent on Solidago Virgaurea extract • Partnerships with start-ups: We work with as a new anti-aging active ingredient, which the pioneers of the future to ideate new, was launched in 2018 in the SUBLIMAGE more energy-efficient processes. L’Essence Strengthening formula. • Collaborating with others: We work with • 15 bachelor’s and master’s theses and two business-model disruptors to create doctoral dissertations have been completed, long-term value. and two doctoral dissertations are in progress. Some examples of our innovative partnerships are as follows: SUPPORTING SUPPLIER INNOVATION: THE GABRIELLE FRAGRANCE BOTTLE FINANCING RESEARCH: THE CD LAB Launched in 2017, the GABRIELLE CHANEL FOR BIOTECHNOLOGY OF SKIN AGING FRAGRANCE was created with the eco-design Skin aging is one of the major topics our of its packaging in mind. While the concept of research team needs to focus on in order to luxury is often associated with the weight and create the most efficient and relevant skincare thickness of the glass bottle, this rebellious products. To do so, CHANEL set up a seven- fragrance required the opposite approach. year collaboration with experts in the field Working with our long-standing glass of aging and biological skin cell deterioration: manufacturer over the course of several years, Professor Dr. Johannes Grillari and his team we developed a thin-walled glass to produce from the Christian Doppler Laboratory (CDL) an exceptional bottle. The lightness and for Biotechnology of Skin Aging, in Austria. beveled lines of the fine glass allow the intense light contained within this fragrance to radiate. The result is a bottle with a carbon footprint approximately 40 percent lower than a typical 50-milliliter perfume bottle made by the same glass producer.
EXQUISITE CRAFTSMANSHIP IS USED TO MAKE CHANEL’S CREATIONS
INNOVATION — CREATING VALUE FOR SOCIETY PARTNERING WITH START-UPS: COLLABORATING WITH MORE SUSTAINABLE TECHNOLOGIES DISRUPTORS: CREATING Capsum is an innovative company, located in THE BOUTIQUES OF THE FUTURE the South of France, that creates products for CHANEL boutiques and retail experience the cosmetics industry. Founded by a French reflect our brand and its status. For our entrepreneur and two Harvard professors, FASHION collections, our philosophy is to Capsum specializes in a manufacturing offer our products exclusively in our boutiques, process based on microfluids. This enables as this is key to the way we present our the company to produce cosmetics in the collections. Our boutiques are central to form of microcapsules, pearls, and bubbles. offering our customers a unique experience CHANEL has supported the company from and relationship with the brand. its inception, recognizing that the innovative technology it uses has interesting aesthetic In February 2018, we announced an exclusive qualities and is more environmentally friendly partnership and minority stake in the luxury than similar technologies. Not only do Capsum digital platform Farfetch. Through this technologies achieve a high percentage of partnership we are working on augmented naturalness — between 95 percent and retail projects with Farfetch, and looking to 98 percent natural ingredients, depending establish a consistent path for our customers on the technology — but they also use a less through the different online media to which energy-intensive cold process. they connect. Leveraging Farfetch’s innovative technology will help us develop an even more Capsum has been involved with some of outstanding customer journey by combining a CHANEL’s most successful cosmetics products, great e-service offering with a genuine CHANEL including HYDRA BEAUTY MICRO CRÈME, experience in our FASHION boutiques. the first cream to be based on camellia microdroplets. They were also fundamental to being able to create CHANCE EAU TENDRE in a pillow-compact form by recreating the very same bottled fragrance in invisible microbubbles of perfume. Today they also work with a number of our competitors in Europe and the U.S.A.
“A L UXURY BRAND HAS TO REPRESENT THE BEST IN SOCIETY IN ORDER TO BE RELEVANT TOMORROW.” — ANDREA D’AVACK PRESIDENT OF FONDATION CHANEL & GLOBAL HEAD OF CORPORATE RESPONSIBILITY
REPORT TO SOCIETY A COMMITTED LUXURY LEADER The influence of our brand far exceeds the size of our operations. Working within the industry and beyond, we want to use this influence to define and promote a more ambitious way to address and manage sustainability challenges. We believe we have to set an example in the As a committed luxury leader, CHANEL focuses way we address climate change: by reducing on the following efforts: our environmental impact and stimulating fair, green growth. It is our duty to live up to the Reducing and compensating for our carbon legacy of the brand, now and for tomorrow. emissions, while also investing in socially Through our long-term business perspective, inclusive renewable-energy projects. we have a clear opportunity to approach sustainability in a way many other companies cannot. Building a more sustainable retail model, including through the environmental certification of our boutiques. Exploring circular design and recycling of our sales and promotional materials.
A COMMITTED LUXURY LEADER CHANEL’S CLIMATE STRATEGY Addressing the impact of man-made climate change is one of the most urgent challenges facing the world, and a significant threat to all businesses. To counter this threat, our global economy must decarbonize rapidly and radically. We believe that we have a key role to play in showing how a luxury brand can strive to address the negative impacts of a changing climate. Indeed, we have high ambitions for the transition from a carbon-based economic model to one that is resilient OUR ESTIMATED and regenerative. We are convinced our long-term GLOBAL CARBON mind-set allows us to make decisions and put in FOOTPRINT place processes that will achieve positive outcomes. Similar to many companies, our approach to climate change has been to measure our carbon footprint and to set targets for reducing direct and indirect carbon emissions, in line with the Paris Agreement (United Nations Climate Change Conference, (Scope 1, 2, and 3 Emissions) COP 21) of 2015. We aim to help limit mean global Estimate includes: ~ 1.9M tCO e 2 temperature increases to 2˚ and even strive for 1.5˚ against a preindustrial baseline by the middle SCOPE 1 SCOPE 3* of the century, and for emissions to be “net zero” Direct Emissions Transport of People by the end of the century. 9,000 tCO e 19,000 tCO e 2 2 We also believe the influence of our brand can SCOPE 2 Transport of Goods increase climate action, both within our company Electricity 145,000 tCO e 2 and beyond. We work with a number of the key 35,000 tCO e 2 Other Scope 3 — partners of the We Mean Business coalition, including The B Team, BSR, the World Business Purchased Goods Council for Sustainable Development, and the and Services 1.7M tCO e Business Renewables Center at the Rocky Mountain 2 Institute to help make the changes needed to * Does not include categories for which we do not have accelerate the transition to a low-carbon economy. estimates, such as use of sold products.
OUR CLIMATE STRATEGY Our climate strategy is based on the following commitments: 1 SIGNIFICANTLY REDUCING THE CARBON EMISSIONS WITHIN OUR DIRECT OPERATIONS TO BE IN LINE WITH THE PARIS AGREEMENT TARGETS. 2 TRANSITIONING TO GREEN POWER IN OUR DIRECT OPERATIONS AND WORKING WITH OUR SUPPLY BASE TO ACCOMPANY THEM IN THIS TRANSITION. 3 COMPENSATING FOR ALL THE CARBON EMISSIONS LINKED TO OUR BUSINESS ACTIVITIES THAT WE CAN’T OTHERWISE REASONABLY REDUCE AT THIS TIME.
A COMMITTED LUXURY LEADER 1 2 REDUCING CARBON TRANSITIONING TO EMISSIONS IN OUR GREEN POWER IN OUR DIRECT OPERATIONS DIRECT OPERATIONS Emissions associated with our corporate As one of the central pillars of our climate buildings, main industrial sites, logistics strategy, we have committed to making a facilities, and boutiques are approximately gradual transition to using only green power 40,000 tons CO eq/year (2015 baseline). in our direct operations, including manufacturing 2 In line with the Paris Agreement ambitions, sites, distribution centers, offices, and stand- we aim to halve these emissions in absolute alone boutiques by 2030. terms by 2030. Coupled with energy-efficiency measures, An extrapolation of committed operational our approach to achieving this objective action plans indicates that a 50 percent has three pillars: reduction in emissions by 2030, from a • Maximizing on-site renewable-energy 2015 baseline, is possible at certain key sites production. through energy-efficiency measures and the environmental certification of all our buildings, • Purchasing green tariffs as an interim factories, and boutiques. measure. Emissions associated with transporting goods • Investing in community renewable-energy and people are approximately 162,000 tons projects. COeq/year. In line with COP21 ambitions, 2 This transition will be challenging for several we aim to reduce these by between reasons, the main one being our presence 40 percent and 46 percent, depending in many markets where green power is not on the business activities. readily available and renewable-thermal- The operational action plans we have identified energy solutions are lacking. Nevertheless, we to date, including packing optimization to are committed to the transition to renewable reduce the volume of transport, a shift from energy wherever we can have an impact. air to sea transport where feasible, and further optimizing transport flows, are not enough for us to reach our targets by 2030. Consequently, we will need to further rationalize elements of our supply chain and increase the volume of products shipped by sea. We will also need to work with our freight providers to identify more sustainable solutions for transport, including, for example, switching to electric vehicles.
CHANEL’S CLIMATE STRATEGY MAXIMIZING ON-SITE PURCHASING GREEN TARIFFS RENEWABLE ENERGY The purchase of green tariffs is an interim This pillar involves factoring renewable-energy measure while we look for opportunities for production, such as on-site solar power, into direct investment in new renewable-energy the construction of all of our new sites, and projects. In each region, procurement and retrofitting renewable-energy production facilities managers will purchase green tariffs into existing ones. As an example, we have wherever available on the local market. already installed solar panels at manufacturing Our Green Power Policy & Implementation and distribution sites in France and the Guidelines set our standards and criteria U.K., and are currently planning more in for buying green-tariffs, and specify our the U.S.A. and Asia. preference for solar, geothermal, wind, hydroelectric (small scale, low impact), and wave/tidal as the underlying energy source. 100 PERCENT SOLAR POWER Currently, all the electricity we use in our AT PISCATAWAY direct operations in France and the United In the United States, New Jersey has some of the Kingdom is covered by a green-tariff contract. country’s most ambitious rooftop-solar-power These two countries represent approximately deployment goals. To meet these goals, businesses 35 percent of CHANEL’s overall global and residents across the state must commit their electricity use. rooftops and parking lots to solar energy. CHANEL is proud to join this growing movement, and we INVESTING IN COMMUNITY have recently signed a 20-year power purchase RENEWABLE-ENERGY agreement in support of a new 3,200 MWh/year solar PROJECTS deployment at our distribution facility in Piscataway. The generation capacity is equivalent to the site’s total Over time, we will try to gradually phase out annual electricity use. Working closely with a local green tariffs in favor of providing direct financial solar developer, we were able to maximize capacity support for new renewable-energy projects at for on-site solar by installing solar-panel canopies a community level in key regions. over the parking lot, as well as a rooftop solar array.
CHANEL’S CLIMATE STRATEGY 3 BUILDING A MORE INCLUSIVE COMPENSATING FOR ENERGY TRANSITION SUPPLY-CHAIN EMISSIONS Extreme climate events will disproportionately We currently estimate our Scope 3 emissions affect the most socially and economically to be approximately 1.72 million tCO e per vulnerable communities. Often, it is these 2 same communities that are excluded from year, with the majority being generated in the economic benefits of the transition to our supply base from the steps associated renewable energy. Just as we look outside our with the sourcing and transformation of immediate operations in building resilience and the raw materials used in our products, and investing in our approach to sourcing, we also the upstream impacts associated with the aim to include communities in how we envision production of sales and promotional materials. a resilient renewable-energy market. For the Work is underway to better understand our new energy system and economy to be truly full Scope 3 emissions in order for us to be sustainable, it must include and benefit all able to set ambitious targets for reducing communities. Based on this vision, we will these emissions over a reasonable time frame. look for renewable-energy investments that In parallel, we are committing to offset at least 1.5 million tCO e per year to compensate for meet at least one of the following principles: 2 our overall emissions, while also continuing COMMUNITY to invest in various insetting projects in our Rather than contribute to financing a large- supply base. scale wind or solar farm, we will aim to invest primarily in community-level projects. Not only is this type of investment closer to our actual INSETTING energy use and spending, but it also resonates Insetting refers to what an organization does within with our brand value of empowering people. its own value chain to balance out its negative impacts INCLUSIVENESS on climate. For CHANEL, insetting is a key component of our strategy to compensate for our Scope 3 carbon In each market we sign a deal, we will look emissions. It translates into projects within our supply to ensure our investment benefits communities base, including agroforestry projects, which are that have historically experienced economic designed to sequester as much carbon as possible. or social exclusion. Our priority will be to work We are a founding member of the International with community businesses and organizations Platform for Insetting (IPI), a multi-stakeholder group to provide training and professional opportunities that facilitates collaboration on insetting projects and in energy infrastructure for local residents, and promotes best practices. ensure equal access to these opportunities. RESILIENCE As extreme weather becomes more common, empowering people will also mean building their capacity for resilience. Providing economic opportunity through training and job creation is one way we can contribute to this. Where relevant, we may also look to invest in physical grid resilience through microgrid and storage capacity.
A COMMITTED LUXURY LEADER SUSTAINABLE RETAIL CHANEL boutiques are a physical representation of the CHANEL brand, and an integral part of the client experience. They are also a significant source of our own environmental impact. Through LEED (Leadership in Energy and Environmental Design) certification and eco-design guidelines, we are aiming to minimize the impact of our boutiques and other points of sale on the environment and human health. Furthermore, we are moving toward a circular model for retail, and have begun to invest in the technology and partnerships necessary to support that transition. Retail represents a significant and growing To support this new way of working, we are proportion of CHANEL’s business activity investing in LEED training for our boutique and, based on extrapolated data, accounts architecture teams. for approximately 17,000 tons CO eq/year. 2 For FRAGRANCES & BEAUTY boutiques, Managing the environmental impacts of our retail spaces is therefore an important priority. we have decided to pursue LEED Volume certification at a global level, according to LEED: CREATING A MORE the new Version 4 standard. To date, as far as SUSTAINABLE RETAIL we know, we are the only luxury brand to be EXPERIENCE participating in LEED v4 volume. LEED Volume means that a set of environmental guidelines We achieved our first boutique LEED known as a “prototype” is pre-certified, and certification in 2012 for the TaiKoo Hui boutique then applied consistently across all future in China. Since then, we have expanded the projects. This has not been an easy process, approach globally across all activities and since the existing LEED standard is not always regions. To date, we have achieved LEED specific to projects of the size and aesthetic certification for 31 boutiques, with 36 more in nature of luxury boutiques. As a consequence, progress. Going forward, all new construction we have been working closely with the U.S. and major renovation of boutiques will pursue Green Building Council (USGBC) and Green LEED certification. Business Certification Inc. (GBCI) to identify
The whole idea of the circular economy WHAT IS LEED CERTIFICATION? is restorative and regenerative by design. LEED is a is an internationally recognized rating Relying on system-wide innovation, it aims system and certification standard devised by the to redefine products and services to phase USGBC for evaluating the environmental, health, out waste, while minimizing negative impacts. and safety performance of building design and Underpinned by a transition to renewable- construction projects, and encouraging market energy sources, the circular model builds transformation toward sustainable design. Projects economic, natural, and social capital. pursuing LEED certification earn points across several categories, including, but not limited to, energy REDUCING PMMA IMPACTS use and air quality. Based on the number of points Since 2014, our FRAGRANCES & BEAUTY achieved, a project then earns one of four LEED activity has taken a number of significant rating levels: Certified, Silver, Gold, or Platinum. steps to reducing the environmental impact of PMMA plastic in its SPM displays. approaches and guidelines most relevant to In 2014, we began using a recycled PMMA our small-scope luxury boutiques. We hope known as Green Cast in our cosmetic display these standards will be able to support other cases — an innovation by our supplier luxury brands seeking LEED certification. Madreperla. This increased the amount of recycled raw materials in our SPM by almost MOVING TOWARD CIRCULAR one-third, and according to life cycle analysis SALES PROMOTION MATERIALS conducted by EVEA, decreased its carbon footprint by 66 percent. While we work to improve our retail spaces, we are also finding ways to reduce the impacts In 2017, the activity launched the Pearl Project, of our product displays and other sales and working with our suppliers Madreperla and promotional materials (SPM) that appear Arkema to produce recycled PMMA granules within them. We are investing in the circular for manufacturing injection-molded SPM economy, the end goal being to phase out components. This project will at least double waste by regenerating materials and products the amount of recycled plastic in our SPM. at the end of their life cycle. To this end, we are progressively improving the eco-design of our SPM, increasing use of recycled raw materials and ensuring they can be recycled easily at the end of their lives.
SUSTAINABLE SUSTAINABLE RETAIL RETAIL WORKING TOWARD CYCLEAPP: COLLABORATING COMPLETE RECYCLABILITY FOR CIRCULAR POINT-OF-SALE In the U.S.A., we use a certain type of display MATERIALS we call “playstations” to promote fragrance In France, our FRAGRANCES & BEAUTY and beauty products. These displays are bulky activity has developed Cycleapp, a pilot and have proven difficult to recycle in the past. project with a digital application to improve To overcome this recycling challenge, our point-of-sale SPM recycling. The principle FRAGRANCES & BEAUTY activity has been of the app is to make it easier for beauty and working with TerraCycle, a company that cosmetics retailers to arrange for the removal specializes in recycling materials that are hard of old SPM displays at the end of campaigns to recycle. This initiative aims to develop a at the point of sale. When a campaign ends, way to ensure complete recyclability of SPM the salesperson simply posts his or her SPM playstation displays at the end of their life. on the application as ready for removal and Launched in 2017, the initiative has reduced recycling, whereupon it is then collected SPM waste being sent to landfill by 38 tons, and sent to a designated recycling center. and will also serve as a pilot for how smaller This ensures that more SPM material enters point-of-sale displays could be recycled more the correct recycling channel and remains fully systematically and regularly. monitored by the company. The test project has been running in Lyon since March 2016 at 13 points of sale. With collaboration between CHANEL, Marionnaud, Le Printemps, Les Galeries Lafayette, La Poste, New Attitude, and Paprec, we believe this app could be a model for the whole beauty and cosmetics retail industry in France by 2020. This project shows our commitment to the circular economy, ensuring we can reuse old SPM materials to create new displays.
“PEOPLE WANT TO BELONG TO AN ORGANIZATION THAT VALUES THEIR UNIQUENESS AND CONNECTS THEM TO A LARGER MISSION AND PURPOSE.” — CLAIRE ISNARD GLOBAL CHIEF PEOPLE & ORGANIZATION OFFICER
REPORT TO SOCIETY A HUMAN-DRIVEN COMPANY For Gabrielle Chanel, creativity and creation were enacted on a daily basis through dedication, passion, and work, allowing her to both achieve financial security and fulfill her personal ambition. We believe work is a source of excellence and also a fundamental means of enhancing the dignity and respect of every individual. Following the legacy of our founder, we believe in human empowerment, promoting self-accomplishment and self-determination wherever our business touches people’s lives. The right of every individual — in particular, To achieve our ambition to be a human-driven every woman — to participate in our economy company, we focus on the following efforts: and society on respectful and fair terms is the most basic form of empowerment, and a necessary condition for our creative capacity Improving respect for human rights to flourish. Therefore, we aim for working throughout our supply base. conditions that respect and enhance the potential of each person, both within the company and throughout our extended Creating the conditions necessary for supply base, where the risks are particularly long-term engagement, performance, and acute in some areas. well-being of our employees at work. Advancing the role of women in society in general.
A HUMAN-DRIVEN COMPANY HUMAN RIGHTS IN OUR SUPPLY CHAIN We are aware of the actual and potential human-rights impacts generated throughout our value chain. We are engaged in an ongoing process of human-rights due diligence, progressively taking steps to identify, prioritize, and address salient issues. In our supply base, we recognize our responsibility to make investment and purchasing decisions that support the highest standards in conformity with our corporate policies, and choose to work only with those suppliers who engage with us in this. Our supply base consists of more than 3,000 Our FRAGRANCES & BEAUTY activity has suppliers around the world, split between what over 900 suppliers, 69 percent of which we term “direct procurement” (i.e., finished provide raw materials. 27 percent supply goods, components, and raw materials) and natural raw materials of strategic importance “indirect procurement” (i.e., sales, promotional for the brand, and we have direct access to and marketing materials, such as shopping the origin of such materials. bags and displays). Our WATCHES & FINE JEWELRY activity Our FASHION activity has over 1,400 supply- has 34 suppliers, supplying gold, diamonds, chain partners, 69 percent of which supply and other precious stones. For indirect finished goods, and the majority of which are procurement of customer-related items, based in Europe (France and Italy). we have over 670 suppliers.
From the beginning, CHANEL has been a manufacturing company. Most of our finished products are assembled in factories we own or we control, mostly in France, Italy, and Switzerland. These factories have a large network of suppliers of raw materials, product components, and nonsalable promotional materials. Our due diligence approach consists of three key components: 1 CLEAR POLICIES AND GUIDANCE GOVERNING THE SUPPLIER RELATIONSHIP. 2 RIGOROUS PROCESSES TO ASSESS AND REMEDIATE HUMAN-RIGHTS RISKS AND IMPACTS. 3 PERFORMANCE MONITORING AND COMPLIANCE AUDITING, AS WELL AS ONGOING DIALOGUE, ENGAGEMENT, AND IMPROVEMENT.
A HUMAN-DRIVEN COMPANY 1 POLICY GOVERNING THE This exercise is conducted on an ongoing SUPPLIER RELATIONSHIP basis with the procurement teams, and Our approach to working with suppliers is requires, at a minimum, tracing the value- governed by our responsible-sourcing policy. adding activity back to the last transformation Based on relevant international obligations stage. Based on our risk-assessment approach, and principles from the United Nations and we have identified where there are areas of the International Labour Organization (ILO), actual and potential risk with a small number this policy sets out our expectations and of our suppliers from a business dependency, requirements regarding issues related to CSR, and/or reputational perspective. labor and human rights, the environment, Second, to better understand supplier and anticorruption. Since 2011, we have asked management of social and environmental risks all our FRAGRANCES & BEAUTY suppliers at a more detailed level, we ask suppliers to to commit to applying our policy’s principles. assess themselves online using our standard. The policy is updated to take into account We first developed this in 2011, in line with regulatory changes and will be introduced international norms, guidelines, and principles, across all activities and regions over the course including the OECD Due Diligence Guidance of 2018. We provide guidance on applying the for Responsible Supply Chains. policy through annual supplier meetings, and through support from trained professionals on our procurement teams. 2 A GOVERNANCE AND OPERATING MODEL FOR RESPONSIBLE SOURCING PROCESSES TO ASSESS In order to continue to monitor the performance of AND REMEDIATE IMPACTS our suppliers, we have created a Responsible-Sourcing Expert Team at the corporate level. It’s their mission In recent years, we have developed a thorough to define and update our responsible-sourcing risk-assessment methodology, which determines guidelines and to ensure coherence in implementing and helps remediate social, environmental, and our responsible-sourcing strategy. Our Sustainability governance risks across our supply base. Excellence Program (SEP) audit committees at divisional and corporate levels ensure the audit results First, we assess all suppliers according to criteria are integrated in follow-up actions endorsed by top covering the state of the business relationship management, and that we monitor results. (purchasing volumes, dependency), social and environmental issues associated with the In total, we have five internal and 10 external trained value-adding activity undertaken by the supplier, and certified auditors devoted to implementing our and potential reputational risks for the brand. sourcing policy.
HUMAN RIGHTS IN OUR SUPPLY CHAIN We also submit this in-house standard to external experts regularly to ensure it covers HUMAN-RIGHTS IMPACT ASSESSMENTS all relevant issues and continues to set the In addition to our risk analysis at the corporate level, high standards we expect from our suppliers. we have commissioned independent organizations We have designed this standard to be both to conduct in-depth human-rights impact assessments all-inclusive (covering social, environmental, at the source of our raw materials when we have governance, and ethics topics) and exemplary identified actual and potential risks. For example, in — establishing high standards for the rest India and Madagascar, they visited and interviewed of the industry for supplier performance on farmers, suppliers, local stakeholders, and other these issues. rights holders to better understand the scale of the risk, its severity, remediability, and the possibility for Finally, based on the results from the first us to influence it. Our responsible sourcing teams two process steps, our internal auditors plan also assess human-rights impacts on-site before and undertake annual audits. We conducted and during the implementation of our reinforcement over 200 of these during 2017. Over the projects at the source of our key raw-materials next two years, we plan to conduct over supplies around the world. 500 audits across our diverse supply base, using an intelligent audit tool that provides We recognize we need to talk to stakeholders and guidance and the most up-to-date information experts for guidance and support in our human-rights possible. Where these audits reveal critical approach. So in early 2018, with the help of a leading noncompliance issues with our SEP standard, business and human-rights organization, we brought we put remediation plans in place, and, if they together function heads from across our business to are not implemented, we may even end our discuss and prioritize our salient human-rights issues partnership with the supplier altogether. and to formulate a plan to address them. At the same time, using a proprietary maturity model, we conducted a gap analysis of our existing human-rights due- NUMBER OF AUDITS CARRIED OUT diligence approach, using the United Nations Guiding AMONG HIGH-RISK SUPPLIERS (2017) Principles on Business and Human Rights (UNGPs). These principles set the international standard for FRAGRANCES 58 human-rights due diligence and help guide us in the & BEAUTY progressive implementation of our approach. FASHION 134 OTHER 6 0 30 60 90 120 150
HUMAN RIGHTS IN SUSTAINABLE OUR SUPPLY CHAIN RETAIL 3 ONGOING DIALOGUE, For example, in 2008, during the financial ENGAGEMENT, AND crisis, a large number of our suppliers faced IMPROVEMENT major financial stress due to the rapid and unexpected drop in demand for their goods Our relations with our suppliers has always and the increasing pressure on prices from been driven by the wish to build long-term the industry. partnerships. From this perspective, our commitment is not only to ensure they meet What was important for us was not to obtain our standards, but also to help them improve short-term financial advantage, but to support their way of working and adopt sustainable and sustain our strategic supplier base. practices. We consider them to be an integral Without this base, we wouldn’t have been able part of our value chain, and we want them to operate over the long term. For this reason, to have the same long-term vision of value we confirmed long-term orders to secure the creation. Beyond audits, we require our most production planning of our suppliers, and, strategic suppliers to report on a selection in certain instances, afforded them shorter of CSR key performance indicators, covering payment terms to help their liquidity. social and environmental issues, and the traceability and CSR performance of their To increase traceability and sustainability of own supply chain. We use these KPIs in annual certain commodities, or particularly complex business reviews to benchmark and improve supply chains where it is hard to make ongoing supplier performance. progress, we participate in multi-stakeholder initiatives (MSIs), to take advantage of The responsibility for our suppliers’ compliance our collective leverage for effecting positive with our responsible-sourcing policy is at the change. For example, to address systemic heart of our purchasing teams’ mission. Our issues such as child labor, we engage focus on creating value over the long term, with partners such as the ILO to find enabled by our independence, means we can long-term solutions. engage suppliers on more than cost and short- term financial-performance considerations. This is critical for effectively remediating social, environmental, and governance issues.
A HUMAN-DRIVEN COMPANY BEING A PURPOSEFUL EMPLOYER CHANEL is a family-owned company whose values are grounded in creating the conditions for people to perform at their best and feel fulfilled and confident in their work. We care deeply about our employees and strive to create a safe environment that values people’s humanity and uniqueness so that they are free to bring their full selves to their work and to their life’s calling. At CHANEL, being a purposeful and human- A SELF-REFLECTIVE driven employer means being intentional, AND INCLUSIVE meaningful, and caring in inspiring our LEADERSHIP CULTURE people; fostering environments that reflect our strong values; encouraging and enabling Over the last few years, we have invested inclusion; and investing in work and workplaces in enhancing and infusing a strong, positive that foster collaboration and well-being. leadership culture. In 2012, starting with the This is critical for the long-term success top leaders in our organization, we launched of our business. an “Active and Conscious Leadership Journey,” through which we encouraged individual self- reflection and opening up to others and to the world in order to be better equipped to face the challenges of a fast-changing business context. The Active and Conscious Leadership Journey course started with the 20 most senior leaders. This was followed by the next 200, and another 400, until now, when a steady stream of 150 employees per year are taken through various iterations of the platform and training, ensuring depth and long-lasting cultural embedding. Through this Leadership Journey, hundreds of employees are optimizing their leadership and enhancing our rich culture.
INTENTIONAL ONBOARDING THE IMAGINE CHANEL FOR NEW MANAGERS PROGRAMS: BRINGING Being intentional, meaningful, and caring PEOPLE TOGETHER is also central to our onboarding philosophy. At CHANEL, we know that inspired, motivated For new managers joining CHANEL, we employees are a condition for business offer a 100-day onboarding plan in which we performance and success in the long emphasize building relationships and taking term. In 2012, to ensure that everyone at time to learn our brand, business, and culture CHANEL understands and feels connected over driving immediate impact. By doing so, with the culture, each other, and our we take the pressure off, valuing long-term purpose, we launched Imagine CHANEL, engagement and people connections through a company-wide culture-immersion a thoughtful immersion into the company and brand-education platform. before they are expected to engage in any operational duties or business decisions. The Imagine CHANEL programs engage people at all levels, from new recruits to senior leaders, and uniquely brings together people from different backgrounds, métiers, and parts of the world in forums that value inclusion. To date, more than 11,000 CHANEL employees have participated in the platform of programs. Within Imagine CHANEL are four programs, conducted throughout the world, that are designed to support employees at different stages of their career. Each program has a specific function and is focused on continually inspiring and connecting people to one another, to the brand, and to our business.
A HUMAN-DRIVEN COMPANY Imagine Discovery and Imagine Perspectives, We encourage a multi-experience journey deployed at market, regional, and global levels, so that our people can learn from different are geared to inspire new and long-serving types of work, different leaders, and different employees by teaching them about our brand, environments and teams. history, organization, and business at different points in their tenure. Through Imagine INVESTING IN OUR Business, we help emerging talent across LEADERSHIP PIPELINE businesses and functions to accelerate their understanding about the business dynamics Through systematic talent reviews at market, and the decision-making necessary to balance regional, and global levels, we engage our our short- and long-term objectives. Then, leaders in discussions about key talent, with through Imagine Leadership, we continue to greater depth and focus. Building on our infuse the Active and Conscious Leadership development and performance philosophies, mind-set and behaviors to our management- we have implemented executive assessments level employees. to better understand and cultivate the strengths of our key talent and enhance professional DEVELOPMENT FOR ALL development and career progression. Together, Our development philosophy is grounded these processes enable us to identify, plan, and in the belief that all employees should be prepare our key talent for larger roles in the supported in developing their personal talents organization, and ensure we build a stronger, and careers. We strive to empower our people more engaged leadership pipeline. to realize their full professional and personal potential and achieve their ambitions through a culture of development focused on increasing their capacity to learn, grow, and innovate. We also believe development is fueled by a person’s sense of purpose and self-motivation, and can take many forms, including skills training and learning-development programs, short-term and/or global-mobility assignments, and challenging, fulfilling work that supports the business.
BEING A PURPOSEFUL EMPLOYER PERFORMANCE AT CHANEL: GLOBALIZING THE CHANEL PEOPLE AT THEIR BEST FASHION RETAIL EXPERIENCE Reflecting our brand purpose, which The Retail Excellence Program brings together emphasizes empowerment, our Design Your employees engaged in our retail métiers from Impact philosophy intends for our people to around the world to Paris — our heart of be on a continual path of self-development, creation — to participate in a rich learning and supports them in taking responsibility for experience on all aspects of our FASHION their growth while contributing to the business. business. The experience combines the following elements: Our process for managing performance is based on conversations with managers and • Visits to our ateliers to learn from CHANEL provides tools, resources, and support to artisans about their exceptional know-how. people on how to achieve as well as what to • Exposure to FASHION leaders to hear about achieve. We thereby strive to keep our people our business strategies and priorities. motivated and growing in a transparent, fair, and developmental process that supports • Expert-led sessions on how to deliver people in being their best, individually and exceptional service to our clients, with a collectively, and ensures everyone is moving strong emphasis on the human touch, which in the same direction. we strive to preserve in everything we do. In the program, our employees also connect EMBEDDING PERSONAL LEADERSHIP with each other, share experiences, and engage IN PERFORMANCE DRIVERS in reciprocal learning, all of which helps to At CHANEL, we focus equally on four performance build stronger relationships and enhance their drivers: Brand Performance, Client Engagement, development. Altogether, the Retail Excellence Leadership & People Strength, and Financial Health. Program deepens passion for the brand How we lead and treat our people is equal in and company, and provides opportunity for consideration to brand and business as a driver of development and global community building. performance. Placing this equal value on Leadership & People Strength is a defining factor in who we are as a company and brand. People matter at CHANEL, and we demonstrate our commitment to their long- term engagement, development, and well-being in our codified behaviors, measurements, and supportive tools to help people optimize their strengths.
A HUMAN-DRIVEN COMPANY OUR WORKPLACES: SOCIAL WORKING LA PLACE ENVIRONMENTS SUPPORT In 2016, after a year of consultation and design, our NEW WAYS OF WORKING team in New York opened a new workplace model designed to encourage collaboration, and explore Our physical workspaces are increasingly ways in which people in different areas of the business a driver of transformation, inspiration, and could connect, collaborate, and share ideas while collaboration. Understanding that the physical increasing visibility and interaction with senior design of our workplaces plays a critical role leadership. The new open space for gathering and in the performance and well-being of our interaction has enabled multiple forms of assembly employees and in our overall organizational as well as events that inspire our employees. The culture, we are investing in workspace “La Place” model is being replicated in other offices, transformation programs across CHANEL. including the new London management offices. New styles and/or expanded workspaces designed in close consultation with CHANEL employees encourage people in different areas of the business to connect, socialize, collaborate, and share ideas. ENSURING INCLUSION GENDER EQUALITY — AND EQUALITY A FIRST STEP WITH EDGE Fostering a culture of inclusion and diversity where individuals have the freedom to be To further enhance our inclusion and diversity themselves and equal opportunity to measures, in 2016–2017 we took an important contribute and achieve is of essential value. step in focusing on gender equality. As a We are committed to equal treatment in our company employing a majority of women and organization and to continually enhancing as a brand primarily for women, we believe it our policies and practices that ensure safe is essential that we ensure that the principles environments free of discrimination and of gender equality and women’s empowerment harassment, as well as equality of treatment are embedded in our organization. and access to opportunities and promotions. We are improving in this area by incorporating We therefore engaged EDGE, the leading inclusion and diversity in our HR talent global assessment methodology and processes, establishing management certification standard for gender equality, to priorities, and conducting regular compliance provide an initial assessment and guidance committee reviews — all at global, regional, on the gender balance across our organization and market levels. and to advise on the steps, which we are now taking, that will help to ensure gender equality in our pipeline development, pay practices, and fair-employment policies. Enhancing inclusion and diversity is also an ongoing opportunity for CHANEL. We will continue to focus on new programs to demonstrate our appreciation for all aspects of diversity, including diversity of thought, and to further promote a more inclusive and diverse culture.
BEING A PURPOSEFUL EMPLOYER PARENTAL LEAVE: COMMITTING TO EQUAL THE ASHOKA PROJECT TREATMENT AND VALUING Ashoka is an NGO that brings together the largest PEOPLE’S WHOLE LIVES network of social entrepreneurs worldwide. Its mission is to identify and support the most innovative ones On January 1, 2018, CHANEL implemented a by fostering links with businesses to maximize new global parental-leave benefit, providing social impact. 14 weeks of leave at full pay for all new parents — both women and men — who expand their In 2018, our FRAGRANCES & BEAUTY activity entered families by birth, adoption, or surrogacy. This into a partnership with Ashoka, based on three pillars: enhanced benefit reflects our shared values on 1. To select and financially support social innovators gender equality, empowerment, and freedom on themes related to our business (renewable of choice by giving women and men equal energy, circular economy, biodiversity, integration flexibility to focus on career and family, moving and diversity). away from stereotypes that women, more than men, should manage family demands, 2. Engage our own employees and develop talents which often force them to trade off on their alongside social entrepreneurs through discovery career. Our global parental-leave policy is an sessions and skills sponsorship. employer’s essential investment in supporting 3. Share what we learn with leading companies in employees’, particularly women’s, long-term other sectors, within a multi-company program personal and career ambitions, including supported by Ashoka. cherishing important moments in their lives and reaching top executive positions, not just Through this program and through social innovation, at CHANEL, but also in society in general. we want to develop a strong culture of sustainability EMPLOYEE SOCIAL and commitment among our employees, and create a “laboratory” for the creation of new business models COMMITMENT and innovation processes. Since it was first created, Fondation CHANEL has provided employees with opportunities to actively participate in the projects it supports. Many employees wish to engage actively in social and philanthropic projects to fulfil their personal and professional desires. CHANEL actively encourages employees to support the associations and social enterprises by matching an employee’s competencies and skills to the needs of these organizations on social and environmental projects. Our employees are thereby helping these organizations not only with their time, but also by helping them build internal competencies in key disciplines for mutually rewarding benefit.
A HUMAN-DRIVEN COMPANY ADVANCING THE ROLE OF WOMEN IN SOCIETY The story of CHANEL is the story of a woman. Through her entrepreneurial spirit and creativity, Gabrielle Chanel rose from humble origins to liberate herself, reinvent the codes of fashion, and influence the world. Today, women are our main customers and comprise 80 percent of our workforce. Fondation CHANEL, and other women’s CHANEL AND THE WOMEN’S empowerment initiatives within the company EMPOWERMENT PRINCIPLES and our supply chain are based on the CHANEL signed the Women Empowerment profound conviction that women are agents Principles (WEPs), a partnership initiative of the of positive change in the world. Advancing the United Nations Entity for Gender Equality and the role of women in society is a key lens through Empowerment of Women (UN Women) and the which we look at everything we do: from our United Nations Global Compact, for the first time brand purpose to our employee-engagement in 2015. The WEPs provide a set of considerations policies and through our approach to supply- to help the private sector focus on key elements chain issues. As signatories of the United integral to promoting gender equality in the Nations Women Empowerment Principles, workplace, marketplace, and communities. we are committed to driving these initiatives To date, CHANEL has primarily focused on not only within the company, but also, more applying the WEPs to the workplace and its broadly in society through Fondation CHANEL. own workforce. Over the next year, we plan It was to build on Mademoiselle Chanel’s legacy to integrate a gender lens more systematically that CHANEL created its first philanthropic into our sourcing policies, programs, metrics, foundation based in France, the Fondation and overall reporting. To help us advance both d’Entreprise CHANEL, in 2011, with the initial the thinking and practice of how companies mission to improve social and economic can achieve progress for women globally and conditions for women and adolescent girls. successfully apply the WEPs, CHANEL joined In 2016, our philanthropic entity was renamed BSR’s Business Action for Women (BAW) Fondation CHANEL. It expanded its operations collaborative initiative. Together with other major globally to the U.S.A. and Europe, while also corporations, CHANEL is involved in two of the strengthening its support to numerous social BAW working-group clusters, mainly to advance purpose organizations (SPOs) in developing women in the supply chain and to empower countries and in East Asia. women to lead on climate resilience.
WHAT WE BELIEVE: Fondation CHANEL promotes the following: A HOLISTIC APPROACH • Access to economic resources and At CHANEL, we believe that women’s entrepreneurship (including microfinance). empowerment and gender equality are • Access to education and vocational training. not only a question of equal rights, but are also a key condition to global progress and • Access to leadership and decision-making. represent a huge opportunity for growth • Access to health and social protection and prosperity. Many studies have shown services. that societies, companies, and communities promoting gender equality are more free, • The use of culture, information, and peaceful, stable, and fair, and lead to more technology as a means for social integration. 2 prosperous and dynamic economic models. • The strengthening of women’s OUR APPROACH organizations, funds, and networks. For over seven years, Fondation CHANEL Since 2011, Fondation CHANEL has expanded has been committed to supporting social significantly. Since its inception, it has supported purpose organizations working to improve more than 60 projects in 35 countries, with the social and economic conditions of women a global commitment of $20.5 million. Over throughout the world. This mission resonates the next five years, we plan on investing over with CHANEL and leads to a systematic $120 million in advancing the role of women in integration of this issue into our work and society. Thanks to its concrete and measurable long-term vision. By giving grants to nonprofit impact, Fondation CHANEL has gained organizations, Fondation CHANEL provides international recognition in its field through long-term support to women and girls in strategic partnerships with UN Women and vulnerable situations and helps them reach the OECD. the first step on the development ladder. 2. For example, the McKinsey Global Institute Report, September 2015, “The power of parity: How advancing women’s equality can add $12 trillion to the global economy.”
ADVANCING THE ROLE OF WOMEN IN SOCIETY In addition to its grant-making activities, The activity of Fondation CHANEL is Fondation CHANEL acts as a change-maker concentrated in a number of regional hubs. for the organizations it has carefully selected: Prior to any intervention, it analyzes the local • Grants are given over longer periods of time context in detail to ensure that the activities it (three to five years) to ensure that concrete supports are the most relevant and impactful, and measurable impact is achieved for with systematic field visits to ensure a sound each project. understanding of the project’s challenges and results. • Fondation CHANEL provides flexible funding to its partners in order to build Fondation CHANEL also provides opportunities capacity and improve their financial stability. for CHANEL employees to use their knowledge In particular, it helps them assess and and talent to strengthen the work of its partners, measure the impact of their activities and either in person or from a distance. Over the supports them in their outreach activities past two years, nearly 200 employees have (external communication, digital and social contributed to technical-assistance missions, media strategy, and advocacy). including in the fields of sales, communications, and human resources, among others. • It promotes systematic exchanges of best practices between the organizations it For more information about present and past works with and participates in advocacy projects supported by the foundation, visit Fondation CHANEL’s website: www.fondationchanel.org activities in the field of women’s empowerment. FONDATION CHANEL HIGHLIGHTS 2016–2017 45 1,600 projects supported women gained employment or in over 35 countries created their own enterprise $330,000 2,000 Average amount of financial women accessed and completed support per project vocational training programs 3–5 years 60,000 Average duration women benefitted from improved of partnerships access to health services
The purpose of this report is to show how social and environmental priorities are taken into account for the long-term value creation of our brand. Our ambitious road map depends on: A SOLID COMPLIANCE PROGRAM THAT ENSURES THE RESPECT OF ETHICAL AND LEGAL STANDARDS APPLIED TO HOW WE CONDUCT BUSINESS. A COHESIVE CSR GOVERNANCE THAT ENSURES NOT ONLY THE FULL IMPLICATION AND ENDORSEMENT OF OUR TOP MANAGEMENT, BUT ALSO, THE IMPLICATION ALL OUR EMPLOYEES THROUGH THE DIFFERENT ACTIVITIES AND REGIONS.
REPORT TO SOCIETY GOVERNANCE FOR RESPONSIBILITY AND SUSTAINABILITY Our standards and principles, including those that apply to the personal conduct of our employees, are exceptionally high. All employees are expected to reflect our fundamental values of uncompromising integrity, respect, and responsibility in performing their professional duties. These global ethical values apply to how we conduct our business and comply with applicable laws, rules, and regulations. “WE ARE DEEPL Y COMMITTED LEGAL COMPLIANCE TO DOING THE RIGHT THING. WE AND ETHICS ALSO WANT OUR EMPLOYEES TO Protecting our reputation is the responsibility COME TO WORK EVERY DAY BEING of every employee. Each of them is expected PROUD TO BE WORKING FOR A to act with uncompromised integrity so that others will know they can trust us and have COMPANY WITH FUNDAMENTAL confidence in our authenticity and fairness. VALUES OF UNCOMPROMISING CHANEL wants to be recognized as a company INTEGRITY, RESPECT, AND that honors its commitments, respects other RESPONSIBILITY FOR THEIR business players, is a reliable business partner, COLLEAGUES, THEIR BUSINESS and is an icon of unsurpassed excellence. PARTNERS, AND THE COMMUNITIES We are also strongly committed to conducting IN WHICH WE OPERATE.” business in compliance with applicable laws, rules, and regulations in all markets in which — SARAH FRANCOIS-PONCET we operate. GLOBAL GENERAL COUNSEL
GOVERNANCE FOR RESPONSIBILITY AND SUSTAINABILITY We take a coherent approach to compliance issues, led by our legal and regulatory REGULATORY COMPLIANCE departments and implemented worldwide. IN PRACTICE: PRODUCT SAFETY It encompasses the following: Whatever the material, from fragrance and cosmetic • Clear governance and guidance from ingredients to leather, textile, or jewelry components, management on company ethics. CHANEL has dedicated teams of experts around the world to monitor all existing and incoming regulations • Helplines to raise concerns and in order to secure the safety of our products. While whistleblowing protection. our finished products are fully compliant with the • Policies ensuring a supportive work various toxicology regulations, we constantly urge our environment and a zero-tolerance R&D and regulatory departments in all activities to try approach to any form of discrimination to further lower the required tolerance levels. or harassment. Wherever possible, CHANEL FRAGRANCES & BEAUTY • High employee protection in terms of forbids the use of certain substances, based on a labor practices and health and security. stricter interpretation of current regulations in this area. The FRAGRANCES & BEAUTY activity has internal • Protection of our assets, including criteria in place that define how these substances intellectual property and data privacy. are identified. The criteria covers both environmental • Anticorruption, money-laundering, and and ethical considerations, such as being on the IUCN fair-competition issues. Red List of Threatened Species, which identifies plants that are near-threatened, vulnerable, endangered, • Ensuring consumer health and safety or critically endangered, as well as substances that through enforcement of strict regulatory involve potential consumer health concerns. compliance for all our products. Over the course of 2018, we will gather and consult a As well as specific policies, compliance panel of experts and non-governmental organizations at CHANEL means constantly reevaluating (NGOs) to conduct a critical review of our criteria for and integrating new regulations, through identifying restricted substances. awareness and specific-issues training, regular compliance reviews, audits, and remedial actions. The new version of the Responsible Sourcing We also expect third parties we conduct Policy referred to earlier in this report, which business with — including suppliers, is being rolled out by all activities in 2018, is the contractors, agents, representatives, materialization of this expectation, and CHANEL distributors, and consultants — to adhere has committed to work with all suppliers to to the spirit of these standards, comply achieve these commitments. with our ethical principles, and meet all of their contractual obligations. We strive to only do business with people who share our commitment to the highest standards of integrity and responsible business conduct.
REPORT TO SOCIETY CSR GOVERNANCE CHANEL’s CSR governance and operating model ensures that engagement on CSR issues become part of the daily activities of every employee, and that CSR is ingrained in decision-making at the senior-leadership level and fully integrated in the company’s overall business process. The key challenge in ensuring a transition STRATEGIC APPROACH AND toward a sustainable business model is to CORPORATE FRAMEWORK engage a profound change of culture, not CSR strategy is led by the Corporate CSR only at top management, but also, and more Team, which is in charge of defining the vision importantly, across the whole employee base. of the brand for societal and environmental The successful implementation of CHANEL’s impact, proposing commitments to engage overall CSR road map must not be only in the different operational teams, and defining hands of experts; it is possible only through a global plan of action as well as a set of the empowerment of each and every individual operational guidelines. in the company. Inspired by these principles, we have organized The Corporate CSR team reports directly our governance on three aspects: to the CEO. All key decisions concerning the brand commitments and their implementation • A strategic approach and corporate are decided at top-management level. framework endorsed by top management. The team is composed of experts in the fields • A coherent operating model that empowers of sourcing, climate, and circular economy. teams in each activity and market. They aim for consistency and coherence in the • An Innovation and Sustainable Development approach we take across the business. Specific Fund, which acts as an acceleration teams of CSR experts exist in each activity, and mechanism toward a sustainable in the other corporate functions, to implement business model. operational CSR plans.
COHERENT OPERATING MODEL What is important in this context is to remove the administrative obstacles that would make ROAD MAPS the adoption of new business practices too We translate our vision and CSR framework slow and cumbersome. into operational strategies through “road maps” for each activity and each major market. In order to accelerate the adoption of our These road maps are designed to be local, CSR road map, we have created an Innovation and define the timing, level of deployment, and Sustainable Development Fund dedicated and resources needed to implement what is to financing initiatives, proposed by outlined in the global framework. operational teams. DEDICATED CSR TEAMS Established in 2016, the Fund finances activities In each activity there are expert teams in across the business that have a positive social charge of defining and implementing the or environmental impact, while enabling us to CSR road maps. In the same way, CSR teams reimagine how we innovate for sustainability. are in place in each major market. It allows us to support projects without bureaucracy or existing budget constraints, AMBASSADORS NETWORK and accelerates our sustainability plans. We have a network of over 140 CSR The fund is financed through an internal carbon Ambassadors representing different functions tax based on our global carbon footprint. and skills at both activity and market levels. These ambassadors act as champions of During 2017, the fund invested in 19 projects to CSR within their respective functions, and increase sustainable innovation, drive sustainable help establish and implement operational sourcing, and facilitate business reengineering. road maps for CSR activities. A high-level committee, composed of the AN INNOVATION CEO, the CFO, the three activity presidents, AND SUSTAINABLE and the global heads of HR, Innovation, and DEVELOPMENT FUND CSR, validates our key CSR policies and commitments, monitors if our improvements We believe that one of the key conditions are in line with our commitments, and for a successful implementation of our CSR oversees the Innovation and Sustainable road map is to ensure that initiatives can Development Fund. be identified and driven by the operational teams with a high level of autonomy.
CLOSING STATEMENT Luxury is seen as a privilege for few, but it creates desire and beauty for many. Because of this, we believe that, as a luxury brand, the way we operate can and should represent the best in society. We are convinced that only an exemplary luxury brand that contributes in an exemplary way to a better world will remain desirable and relevant for all tomorrow. In certain areas, thanks to our long-term approach, we have made some concrete progress. We are aware that in other areas, we still have significant work to do, and we are constantly trying to step up our ambitions and commitments to strive toward exemplarity. We know, as well, that we cannot achieve this alone. We look forward to engaging more with our stakeholders, to listening and learning about how we can achieve our objectives and ambitions faster, and with ever more positive impacts. This report is CHANEL’s first step in a commitment to sharing more with stakeholders in the coming years. We see this engagement as the very best way for us to fulfill our obligations to society, and to be exemplary in the luxury industry.
Photo credits: Page 4 (left) — © Comoedia Illustré 1910 Photo Félix / All Rights Reserved. Page 4 (middle) — © Lipnitzki / Roger-Viollet. Page 4 (right), 8, 16, 19, 28, 32, 42, 46, 54 — © CHANEL. Page 5 (left), 34 — © CHANEL Watches. Page 5 (middle), 6, 10 — © CHANEL Fine Jewelry. Page 24 — © Olivier Saillant. Page 14, 22, 25, 26, 36, 48, 68 — © Anne Combaz. Page 64 — © All Rights Reserved.
REPORT TO SOCIETY