An Exploratory Study of the Mechanism of Sustainable Value Creation in the Luxury Fashion Industry

In recent years, increasing numbers of luxury groups have adopted sustainable practices in their supply chains (sourcing, manufacturing, logistics, distribution, servicing, waste and recycling). However, the report from Greenpeace International organization (2014) indicates that some luxury brands/companies did not actively conduct sustainable practices to produce items, which is likely attributed to the cost and risks caused by such practices outweighing the benefits. This, to some extent, is due to the failure of developing collaborative practices. Specifically, some luxury brands may fail to develop collaborative practices to create value that are able to benefit multiple stakeholders. Thus, in our study, we explore the value creation mechanism to create sustainable value that benefits not only brands’ shareholders, but also other stakeholders, including producers, customers, other stakeholders in the society (e.g., marginalized people) and the environment. In addition, based on a case study from Stella McCartney and Kering and the literature on value creation, we develop a novel model for guiding sustainable value creation (i.e., value co-creation model), where the conceptual building blocks and specific practices are presented. Our contribution lies in extending the knowledge of the value co-creation model from co-creation with customers to co-creation with multiple stakeholders and elaborating systematically and empirically sustainable value co-creation mechanisms including the building blocks and specific practices. In addition, this study offers significant managerial insights for luxury brands/companies to effectively achieve sustainable value.