Milan, Italy — A mere 40-minute drive from the opulent shops on Via Monte Napoleone reveals a stark contrast in the luxury industry—a troubling narrative of labor exploitation that has recently captured headlines. In a nondescript building in suburban Pieve Emanuele, an ongoing investigation by the Milan Public Prosecutor’s Office has uncovered allegations of workers toiling long hours under harsh conditions to package bags for iconic brands like Armani. Meanwhile, another factory just twenty minutes away was reportedly assembling Dior bags, which retail for €2,600 ($2,865), for merely €53 each. This distressing situation brings to light how luxury brands, while marketing themselves as paragons of ethical craftsmanship, may be entangled in exploitative labor practices that prioritize profit over humane working conditions.
Brands like Dior and Armani present their commitment to high standards and ethical sourcing as integral to their identity. Jean-Jacques Guiony, CFO of LVMH, which owns Dior, claimed ignorance of these labor violations during an earnings call in July, saying, “We had no idea about this situation… Apparently, it’s not enough.” Critics argue that this lack of awareness is indicative of deeper systemic issues embedded within the luxury supply chain—practices that may be considered, as one Milan prosecutor noted, “part of a broader business policy exclusively aimed at increasing profit.”
In response to the investigation, both Armani and Dior have put measures in place to improve oversight, yet neither company is facing direct charges. The repercussions are largely reputational, as fears mount about the implications of these findings for their carefully cultivated brand images. With significant regulatory scrutiny on the horizon and more brands potentially implicated, the stakes are higher than ever.
The luxury industry has long propagated a romanticized image of artisanal craftsmanship, presenting its products as exemplars of ethical standards and European heritage. Antoine Arnault, LVMH head of image and environment, even suggested that luxury is “sustainable by nature.” However, this ideal clashed with the recently revealed realities on the ground, where a blend of corporate greed, structural inertia, and deliberate ignorance appears to have shaped the actual practices of these brands.
Experts in luxury supply chains believe that many within the industry are aware of these issues but are hesitant to challenge the status quo. Hakan Karaosman, an associate professor at Cardiff University, stated, “Everybody is aware of the situation… People don’t want to ask questions, because if they do, they open Pandora’s box.” This avoidance is becoming increasingly difficult, as social media amplifies critiques, revealing disconnects between the elevated price points of luxury items and their alleged manufacturing costs.
The investigation highlighted troubling practices in factories supplying luxury brands. For instance, in a raid on a factory manufacturing bags for Armani, Italian police discovered workers living in squalor and operating machinery with disabled safety features, earning slightly over €6 per hour. In Italy, there is no official minimum wage; instead, base salaries are determined by sector-specific collective agreements, which stipulate a minimum wage of €9.82 for leather workers. Despite not directly contracting with this factory, the presence of an Armani employee on site further complicates the brand’s ethical claims.
Dior maintains that while its suppliers obscured illegal practices despite audits, it remains committed to ethical standards. The company argues its third-party inspections, which assess compliance with its supplier code of conduct, are hampered by inadequate oversight. Critics, however, contend that these inspections often only scratch the surface, with suppliers receiving advanced notice and routinely hiding infractions from external auditors.
Many companies—including LVMH and Armani—have adopted ethical codes intending to regulate their suppliers. Still, several industry insiders suggest that these policies are selectively enforced based on convenience and profitability. Albert Meost, a veteran in the fashion sector, remarked, “If you look in reality at what’s the effectiveness of all the controls [the brands] are doing, it seems that from time to time they turn the eye not to see where the big problems are.”
The evolving landscape of luxury goods has also contributed to a complex web of subcontracting, where high-priced brands depend on lower-tier suppliers who frequently cut corners to stay competitive. The “Made in Italy” label, while associated with quality craftsmanship, often obscures the existence of illegal practices, including the employment of undocumented migrant workers and violations of labor regulations.
The pressure on luxury brands to deliver quality products at high volumes has intensified due to rising consumer expectations and competitive market dynamics. The once-sacrosanct model of artisanal craftsmanship is increasingly compromised as brands chase profit margins, often at the expense of ethical labor practices.
As the luxury market grapples with changing consumer perceptions and imminent regulatory actions, brands are beginning to feel the weight of their practices. The Italian Competition Authority has initiated investigations to assess whether Dior and Armani misled consumers regarding their claims of ethical manufacturing. Given potential penalties and the reputational fallout, luxury brands may soon find it necessary to reevaluate their sourcing and production strategies.
In conclusion, the luxury sector is at a crossroads, challenged to uphold its aspirational narrative while faced with evidence that undermines its reputation. As scrutiny rises and consumers become more aware of the realities behind luxury goods, companies must adapt both their practices and narratives to align with a more ethical approach to business.
