Investors are increasingly calling for heightened scrutiny of LVMH’s supply chain practices following allegations of worker exploitation linked to subcontractors for Dior, one of its flagship brands. The investigation has spotlighted potentially exploitative conditions at Italian factories, prompting major shareholders, including Europe’s prominent asset manager Amundi, to demand more transparent auditing of suppliers.

This demand comes amid revelations disclosed by Italian prosecutors, who highlighted that Dior’s subcontractors reportedly paid as little as 53 euros per bag, despite the brand selling these items for around 2,600 euros. This discrepancy raises serious ethical questions about profit margins in the luxury goods sector and the treatment of workers tasked with production. Amundi, which holds a stake worth approximately $2.2 billion in LVMH, has emphasized the need for robust policies in monitoring working conditions and supplier practices.

In response to the backlash, LVMH has stated that it updated its supplier code of conduct and is committed to ensuring fair wages. However, investors remain skeptical, as independent ratings have categorized LVMH’s efforts on living wage policies as “embryonic.” Asset managers are advocating for unannounced audits of suppliers to ensure compliance with ethical standards, aligning with broader shifts in corporate accountability.

As the luxury industry grapples with these pressing issues, LVMH’s ability to mitigate reputational risk while adhering to consumer expectations for responsible sourcing will be closely watched by investors and consumers alike. This case underscores a growing trend in which transparency and ethical supply chains are becoming paramount to sustained success in the competitive luxury market.