Annual Report 2023

Sustainability concerns are increasingly motivating consumers everywhere. And luxury brands are taking note. At the same time, the typical profile of a luxury buyer is also on the move. As Ferrari S.p.A. (Ferrari) CEO Benedetto Vigna explains to Francine Lacqua in an interview for the “Leaders with Lacqua Goes Green” series, a Ferrari driver is more likely to be a woman under 40 and based in Asia-Pacific than ever before: “40 percent of our new clients are younger than 40 years old.”

China, Korea and Taiwan are key markets and women make up over a quarter of buyers of new and pre-owned Ferraris in China. So-called Gen Z consumers, those born between the mid-90s and early 2010s, are increasingly a buying force to be reckoned with in the luxury goods space. A report published by Bain and Positive Luxury found that this cohort of consumers accounted for the growth in luxury spending in 2023. And not only are they buying luxury goods at a younger age, they are also rewarding brands that have a positive sustainability story.

Redefining luxury

Luxury brands, by definition, are not necessities. So how do they fit into a world where consumers are more conscious about what they consume? This poses a quandary for many luxury brands, including Ferrari, a powerful brand associated with roaring engines.

“We are always looking at three dimensions: the design, the technology performance, and also the driving emotion,” Vigna explains. “A luxury company makes an emotional product, a symbolic product, not a functional product.”

For luxury brands, a key step in this evolution is redefining what luxury is. Ferrari now defines luxury as “exclusivity, rarity and longevity underpinned by a commitment to innovation.” The firm says its goal is to make enough, but not too much. Keeping volumes restricted supports scarcity and heightens desirability, and it’s an approach that appears to be working: some Ferrari cars have a three-year waitlist.

An electric future

Ferraris are already going electric, and consumers are buying. Across the world, demand is rising for luxury electric vehicles: the market is forecast to grow at a compound annual growth rate of more than 17.7 percent between 2023 and 2030. In 2023, hybrid Ferraris outsold conventional ones for the first time and the firm predicts approximately 60 percent of car sales will be either fully electric or hybrid by 2026.

Ferrari fans wanting fully electric cars are facing a longer wait. The company has decided to scale up its electric innovation in-house and is developing its own battery technology, electric motors, battery packs and power inverters. Ferrari’s first fully electric model is expected to be ready by 2025.

For Vigna, a physicist by training who has reportedly registered over 200 patents, building in-house expertise is important. “We decided we wanted to handle the battery, engine, electronics and then the assembly of the car in house,” Vigna explains, adding that they choose what to focus on internally based on two criteria: competence and speed. Ferrari has been tight-lipped about the specifics of its forthcoming electric model, but rumors are the new electric vehicles will still roar thanks to speakers to enhance the sound. Vigna wouldn’t offer details but added: “I can tell you this: it's going to be unique.”

Driving change in supply chains

But while electric vehicles will be a key part of Ferrari’s future, it is taking a holistic approach to decarbonization across its supply chain. “Becoming green is important for our social license,” Vigna says.

The iconic car brand has committed to going carbon neutral by 2030 across its entire value chain, while also addressing direct and indirect greenhouse gas emissions. In 2022, Ferrari implemented a raft of initiatives to achieve a 5 percent reduction in energy consumption per car. This included a 1MW fuel cell plant and photovoltaic system in Maranello to power its production operations and new factory filters to save more than 250 tons of aluminum per year.

Luxurious listening

The Ferrari CEO thinks it will succeed because it keeps “open eyes and open ears to what other people are saying inside the company and outside.” Indeed, Ferrari seems to have found a formula for retaining its luxury brand while moving to a more sustainable way of operating.

“We have always to have this kind of attention toward the future,” he adds. A relentless focus on future innovation will help Ferrari continue its technological reinvention. While some luxury brands see sustainability as a threat to their existence, Ferrari views it as vindication of its obsession for innovation. In a world where people are increasingly judged for their consumption choices, luxury brands will be focusing on how their products make people feel.

Watch the full episode for more insights which was first aired on November 23, 2023, on Bloomberg.com.

Every industry needs to play its part to limit global warming and the impacts of climate change. And the beauty sector is no exception.

For Nicolas Hieronimus, CEO of L'Oréal, the beauty industry’s path to sustainability relies on connection, ingenuity, and cooperation between every stakeholder in the value chain. As he explained in an interview with Francine Lacqua for Bloomberg: “I believe in human creativity and innovation; that will provide us with solutions.”

L’Oréal’s sustainable journey began over 20 years ago. “We started working on sustainability topics in the early 2000s. We had our first Sharing Beauty With All program in 2013, and that led us to reduce our CO2 emissions by 90 percent whilst increasing our production by 45 percent.”

For L’Oréal, achieving greater sustainability hinges not only on decoupling emissions from growth, but also encouraging other stakeholders to play their part too. “We are of course enticing and stimulating our suppliers, who also need to do their sustainability transformations, to do it as fast as possible because they are [part of] our impact.”

Consumers also have a role to play in making the beauty industry more sustainable. Fortunately, sustainability is a key consideration among beauty consumers. About 90 percent consider sustainability when shopping for beauty products, and nearly one in five consumers believe a product’s sustainability information is more important than price when making a purchase decision.

Nicolas believes that big brands have a responsibility to steer customers towards more sustainable offerings. Regarding eco-friendly packaging, “the best way to reduce plastic is to convert as many consumers as possible to refills,” he says. “We are also launching products which are non-rinse to reduce water consumption. And in our advertising [we are] trying to convince consumers to reduce their water consumption.”

Don’t greenwash the facewash

There are many sustainability levers for the beauty industry to pull, but there are challenges to overcome too. Sticking with packaging, Hieronimus explains how a company’s bold ambitions need to be tempered with reality. “We’ve committed to have 100 percent recycled plastic by 2030 [but] today the availability of recycled plastic is not big enough for us to transform everything,” he says, which is why L'Oréal is co-investing with other industry leaders to funnel more plastic waste into their recycling schemes.

The risks of climate inaction are great, but so are the risks of putting a foot wrong in the sustainability spotlight. “Young generations pay more attention to sustainability and so they are looking at brands that are greener. But you have to make sure you’re authentic because they hate greenwashing,” Hieronimus says.

Combine this with an enduring demand for high quality products and the margin for error grows slimmer. Consumers, Hieronimus says, “will never sacrifice product quality and efficacy to sustainability.” It’s therefore crucial for their future that brands create products which meet consumer expectations. “I think that in the future, if you talk about competition, the winners will be … those who can create products that are green, effective and safe.”

Small companies, big challenges

The scale of these challenges is multiplied for smaller brands who might lack the resources, expertise or influence to have big impacts on the beauty industry. The availability of sustainable materials and complex consumer preferences are difficult barriers for small companies to overcome; but so too are regulatory barriers and the need for greater transparency and traceability in supply chains. Climate risks pose growing threats to business operations, including supply chains, making it increasingly important for brands of all sizes to take a holistic risk management perspective to embed resilience.

Understanding a company’s position in its industry is crucial for determining impact across multiple stakeholders, and this is where pan-industry cooperation comes into its own. Large companies like L'Oréal can use their influence to make sweeping changes which enable smaller brands to green their own corners of the industry, which cumulatively advances progress for everyone.

The science of beauty

One way L'Oréal is leveraging its influence is its membership of the EcoBeautyScore consortium, a global forum of over 70 industry stakeholders working to empower consumers to play their part in the greening of the beauty industry. The consortium's two main deliverables are a science-based environmental impact assessment and a unified scoring mechanism for products, both of which will be internationally recognized and help consumers to make more sustainable choices.

Hieronimus is optimistic about the beauty industry’s role in fighting climate change: “I like when we as an industry not only make people look good and feel better, but also [when] we work together to have a positive impact on the planet.”

Watch the full episode for more insights which was first aired on September 21, 2023, on Bloomberg.com.

Psychological research suggests that the more we are exposed to bad news about the threat of environmental disaster, the more we start to disengage, a phenomenon sometimes referred to as apocalypse fatigue. That’s something of a problem, since there is a lot of bad climate news right now.

“The ocean is the warmest it’s ever been, wildfires are burning; we’re in a very dire moment,” laments Cristina Mittermeier, a world-renowned conservationist and photographer. And just as the research predicts, the scale of the problem has left many people overwhelmed. “It feels like trying to stop a train that’s in motion.”

So how do you re-engage people around the challenge of our lifetime? Mittermeier thinks that part of the answer might lie in photography, a career she embarked on in her thirties after working as a marine biologist. “I was a scientist contributing to the scientific literature, and it takes a long time to collaborate with your peers to write a scientific paper. When it finally comes out, nobody reads the stuff. It just sits on shelves,” Mittermeier recalls of her time working in academia.

But when she had the opportunity to collaborate with a photographer as part of a book project, she had a lightbulb moment. “When the book came out, people weren’t reading the text, but when they saw the photos, they were stopping to ask questions,” she remembers.

If photography has the ability to stop people in their tracks, it’s because some things really have to be seen to be believed. For example, a turning point for Mittermeier came when, as a student, she was an observer on an industrial fishing boat. “It was horrific to watch: these enormous chains are dragged across the bottom of the ocean…removing all the carbon that’s stored there. And when the net comes up on deck, you get one shrimp for 10 other creatures that are dead.”

The power of the camera means that people in a position to make changes can see the scale of the issue with their own eyes. “Heads of state are really busy with other important things — they’re thinking about wars, about the economy,” Mittermeier says of her climate change advocacy work. “But there’s something about photography that really engages people…So we use the fact that photography is such an easy entry point to talk to presidents and ministers about these issues.”

It’s not just world leaders and decision-makers who are connecting with the issue of climate change through photography. In fact, Mittermeier became the first female photographer to reach 1 million followers on Instagram. That’s because, while scientific language can feel intimidating, photography is often seen as a more accessible medium, particularly at a time when smartphones have made high-tech cameras available to the masses. “It has taken away the high-brow intellectualism that a lot of people don’t engage with, because nobody wants to feel like they’re not informed, that they’re ignorant of a subject. Photography allows you to at least begin engaging,” Mittermeier says. Photography is, she feels, “a way of inviting new audiences into this conversation.”

Photography could also offer an antidote to the barrage of negative climate headlines, instead celebrating our planet and inspiring people to work together to protect it. “I’ve always been very inspired by Dr. Martin Luther King, and when he started his speech, he didn’t say, ‘I have a nightmare.’ He told us he had a dream and then he articulated what that vision was,” Mittermeier points out. “To solve climate change, we need to articulate a vision of the planet we want to inhabit. Having hopeful images is an invitation to actually make that reality.”

That’s a technique used to great effect by other photographers, including Sebastiao Salgado, the artist behind Amazônia, a groundbreaking photo exhibition that celebrates the Brazilian rainforest, its landscape and indigenous people, and for which Zurich is the main global sponsor.

Salgado’s exhibition, which was seven years in the making, features more than 200 black-and-white photos that take the audience on a journey through the world’s largest rainforest. In doing so, he uses the power of photography to show that, despite the devastating negative impact humans have had on the Amazon, there is still a lot left to fight for. “The heart is there yet. To show this pristine place, I photograph Amazônia alive, not the dead Amazônia,” he told journalists when the exhibition first opened.

When you inspire people through a medium like photography, you engage them in a way that’s hard to do with just scientific facts or shocking newspaper headlines, Mittermeier has found. “If you come in and you attack and you criticize and you guilt people, you almost always get a no,” she says. “When you talk to anybody, not just politicians, from a point of view of inspiration and hope and positive action, almost everybody says yes. It’s amazing.”

Watch the full episode for more insights, which was first aired on July 27, 2023, on Bloomberg.com.

José Neves was a child when he first understood the power of technology. “When I was eight, I got a computer for Christmas, and it came with no games, so all I could do with it was code,” he recalls. This was the 1980s, during the rise of tech giants like Microsoft and Apple. “Technology was completely revolutionizing everything. I remember thinking, as a little kid, I would love to be a part of that revolution.”

Fast forward several decades, and as the founder, chairman and CEO of Farfetch, an omni-channel platform for high-end fashion brands and retailers, he’s turning his childhood ambition into a reality. And he’s transforming the industry along the way, especially when it comes to the role his company can play in making fashion — which produces 10% of global carbon dioxide emissions — more sustainable.

“One of the biggest issues in our industry is overproduction, and I think if we can make sure that a product’s life is extended as much as possible, that goes a long way towards solving the problem,” he notes. “We were one of the first multi-brand platforms that sells new products to incorporate pre-owned and resale items.”

Another huge contributor to the fashion industry’s environmental footprint is the impact of shipping. While online stores can be better for the planet than their bricks-and-mortar counterparts, getting products from a warehouse to the customer’s front door emits a not-insignificant amount of carbon. “That’s why we have shipping from 50 countries,” Neves explains. “So that we can optimize local and domestic shipping.”

In keeping with his techie roots, Neves believes technology offers some of the best hopes for making the fashion industry sustainable. He’s already seeing that play out with the issue of online returns, which generate a surprisingly high amount of carbon dioxide (CO2) — the equivalent of more than 3 million cars each year in the U.S. alone.

While returns on Farfetch are lower than industry standards, “they’re still a double-digit percentage of sales,” Neves says. His company is harnessing the power of technology to get those figures even lower. “We’ve acquired and developed a virtual try-on company, and we’re seeing a lot of success with things like sneakers and shoes,” he points out. Another potential game-changer is “using artificial intelligence to figure out what a customer’s size is, based on past behavior, purchases and returns.”

It’s these types of innovations, which allow Neves to combine his passion for both technology and fashion, that he thinks will help move the needle. “These things are very powerful, and we’ve seen that they consistently have a positive impact on the level of returns.”

More importantly, Farfetch data shows that innovations like these can be good for both the planet and business, as customers are increasingly looking for more sustainable options. “We have a filter that customers can use that allows them to only buy conscious products,” he explains, referring to a third-party sustainability rating given to all brands and products on the platform. “Those who shop conscious products are growing much faster than the average of the marketplace, so we can go back to the brands with this data and say, ‘look, if you do the right thing, customers will appreciate it.’” In fact, eco-minded customers are putting their money where their mouth is. “They will pay more if they believe that a product or a specific brand is good for the environment,” Neves claims.

Ultimately, he believes, creating these types of win-win situations will do far more environmental good than simply finger wagging. “Different businesses will move at different speeds and there should be no judgement,” he says. “We should have a positive attitude about this.

In the second episode of Leaders with Lacqua Goes Green, sponsored by Zurich, Bloomberg’s Francine Lacqua sat down with José Neves, Farfetch founder, chairman and CEO. Watch the full video, first aired on June 22nd 2023, for more insights.

During the Zurich sponsored Bloomberg Green Summit held earlier this year, Zurich unveiled an inspiring video, "Listen to the Zurich Forest”. It tells the story of the Zurich Forest Project in Brazil, a small but tangible example of how Zurich is taking action to address climate change.

It’s hard to imagine anything more disruptive than the internet. It has, after all, changed almost everything, from the way we communicate to how we work. But for John Podesta, a former White House chief of staff and now advisor to US President Biden on clean energy, the push to get to net-zero emissions will have an even more radical effect on our lives and our economy.

“I lived through the earliest part of my career seeing the power of the internet and what it did to communications and information technologies. This is even more profound than that,” he said at the Bloomberg Green Summit in New York. “We have to get to net-zero, and that’s a transformation of the global economy on a size and scale that’s never occurred in human history.”

If that sounds daunting, that’s because it is. Take the example of clean energy. As Podesta pointed out, “clean power is already cheaper than fossil power.” And yet, as was reported in the 2023 Global Risks Report, developed by the World Economic Forum in collaboration with Zurich and Marsh McLennan, geopolitical tensions and economic pressures have seen the EU spend around €50 billion on fossil fuel infrastructure and supplies.

Geopolitical strife and economic uncertainty aside, there are many more roadblocks on the path to net-zero emissions. According to the Financial Times, business executives are not convinced the workforce is equipped with the skills needed to put in place the transition, and the returns on investment for green projects are not yet where the markets would like them to be.

Initiatives such as the US Inflation Reduction Act — which provides funding and incentives to accelerate the clean energy transition, and which Podesta is tasked with implementing — provide one example of how governments can help remove these roadblocks. But as Podesta says, even throwing billions of dollars at the problem does not take away from the complex nature of the challenge. “I thought it’d be easy to give away $370 billion, but it turns out there’s a lot to it to try to get right,” he joked, adding that the most effective approach will be to “go sector by sector.”

One sector that has already seen huge transformations is the transport industry, which in 2021 accounted for 28% of greenhouse gas emissions in the US.

According to Brazilian motorsports racing driver Lucas di Grassi, who was also in attendance at the Bloomberg Green Summit, “back in 2012, nobody was really talking about electric cars.” It was around that time that di Grassi became the official test driver for Formula E, a motorsport championship for electric cars. The idea, he explained, was “to accelerate the development of technologies that you’ll see in commercial vehicles in the future.” A decade later, global sales of EVs hit 6.6 million, almost doubling from the previous year.

Of course, government subsidies have helped boost those sales. In the US, for example, provided certain conditions are met, consumers buying electric vehicles can receive a tax credit of $7,500. Government regulation will also have a role to play in the gradual phasing out of fossil-fuel-powered vehicles. Indeed, many countries — the UK and Denmark, to name just two — have already outlined their plans to ban sales of new cars with internal combustion engines by 2030.

That goal might sound audacious, especially given the slow pace of progress when it comes to developing the infrastructure needed to support the mass uptake of electric vehicles. But di Grassi thinks the technological developments he and his teammates have seen on the racing tracks will soon be available on the consumer market, which could help smooth the transition and offer new opportunities for businesses. “There are many different technologies that we are racing with now that others will see on the road in the next few years,” he explained. “Our batteries have a charge rate of 600 kW.” As a point of reference, today, the fastest commercial chargers have a rate of 350 kW, and home chargers have a rate of 3.6 kW.

For Podesta, these types of innovations will ultimately be good for both the economy and the environment. “The push for investment and innovation is happening across the board,” he noted. “That creates growth, that creates momentum, that creates sustainability.”

Zurich Insurance Group was a presenting sponsor of the Bloomberg Green Summit for the third consecutive year. During the event, Zurich unveiled an inspiring video, "Listen to the Zurich Forest,” which tells the story of the Zurich Forest Project in Brazil, a small but tangible example of how Zurich is taking action to address climate change.

Watch the full episode for more insights, which was first aired on May 25, 2023, on Bloomberg.com.