Destruction ban reveals luxury brands’ problem with unsold stock

Earlier this month, shoppers on Yoox could snap up suede Brunello Cucinelli sneakers for 617 euros ($693), around half the price on the brand’s official website. If they felt like pairing them with a beige Gucci mini-skirt, that was available for 800 euros ($899), close to 50% off as well. A Burberry T-shirt? The e-commerce website sold one for less than 200 euros ($225), or 60% off its original price. Overall, some 2,500 products from those three labels were available, heavily discounted, on Yoox. It’s a rare sign of the challenges that the luxury market faces, as even wealthy customers cut back on spending. High-end fashion and leather goods makers try to avoid slashing prices or selling off excess stock because it damages the aura of exclusivity that they try to build around their products. That’s why at times, they’ve preferred to burn or shred their unsold goods: a controversial policy that is now banned in the European Union, where the industry’s largest brands originate from. Experts warn that there are many loopholes that may allow brands to continue to destroy goods. Nevertheless, the EU’s drive for greater sustainability in the fashion industry is about to create a serious challenge for luxury companies. From next March, the bloc will require them to report how many unsold products they’ve destroyed, and why. That not only risks a backlash from customers and civil society, but could also give competitors’ commercially sensitive information about how particular ranges are selling. The new rules risk a “double penalty,” Julie El Ghouzzi, a luxury goods consultant, said. “When you do something that could be understood as reprehensible, then you have a huge risk of reputation, and reputation in luxury means desirability.” What the Chanel Hong Kong shredding case exposed about luxury overstock The volume of high-end goods being junked in the luxury business was thrust into the spotlight by a trial in Hong Kong this year. In August, four former workers in a Chanel warehouse in the city were sentenced to between four and seven years in prison for conspiring, in 2016 and 2017, to steal about HK$8.77 million ($1.12 million) worth of stock that had been destined for the shredder. The group was intercepted and more than 700 items were seized by police. “Chanel would destroy about 10,000 to 20,000 items of their fashion products once every 3 to 6 months, using their shredding machine,” the judge wrote in the sentencing. One of the defendants explained that Chanel’s unsold goods would typically be discounted first by 25% after six months of being on the market and by 50% after a year, with the possibility for staff to purchase the items at 20% of their retail value. Eventually if the goods didn’t sell, they’d end up in the shredder. In a statement, Chanel said that the figures mentioned in the trial do not reflect the company’s current practices, “which have evolved in line with its sustainability commitments.” The company said that it now only produces collections after receiving orders through its stores, and that products that can’t be sold are “redirected towards reuse, recycling or other circularity solutions.” How French law, EU rules and brand pledges tackle unsold luxury fashion In 2020, between 264,000 and 594,000 tons of textiles were destroyed before use in Europe annually, according to figures from the European Environment Agency — equivalent to between 4% and 9% of all products on the market, and accounting for as much as 5.6 million tons of CO2 equivalent, roughly the annual emissions of a million petrol cars. In 2022, France, home to some of the luxury industry’s biggest names, adopted a circular economy law that obliges fashion companies to reuse, repurpose or recycle unsold products. EU rules, the Ecodesign for Sustainable Products Regulation — modeled on the French law — came into force for large companies this July. The UK government told Bloomberg it’s also preparing to announce circular economy measures. Even before the laws were introduced, several groups had already made commitments to limit or entirely stop the destruction of unsold goods. After pressure from shareholders, Burberry Group said in 2018 that it would stop destroying unsold items. However, the company’s April 2026 Global Environmental Policy document now reads that the company is “committed to ensuring no destruction,” but specified that destruction means “incineration with or without energy recovery or landfill,” which experts said leaves open other options. Burberry declined to comment. In 2020, Kering, owner of brands including Gucci and Saint Laurent, vowed to end this practice, saying that the “destruction of unsold products is prohibited throughout the group” — although in the company’s latest report, the word “prohibited” has been dropped, with the company writing instead: “As regards avoiding the destruction of products, Kering complies with all applicable regulations.” Kering declined to comment. In its 2023 sustainability report, Prada, which also owns Miu Miu, announced that in anticipation of new EU regulations banning the destruction of unsold apparel and footwear products, the group “set a target to avoid the shredding of unsold goods from 2024.” Prada didn’t provide updates in its 2024 and 2025 reports regarding its vow not to shred, but a spokesperson said the group has a “zero destruction policy, which aims at identifying sustainable pathways for deadstock and unsold products.” They added that “since adoption, no products and materials have been destroyed.” Why leather handbags and logoed garments escape Europe’s destruction ban Although the laws in France and the European Union ban the destruction of textile and fashion products, the regulations in both places have loopholes. In France, companies can recycle products by shredding or pulping fabric into lower-grade materials to turn into insulation or carpet fiber, which is the industry’s “get out of jail card,” said Christina Dean, founder of R Collective, which upcycles goods from luxury houses that would otherwise be destroyed. “You put gold in and you get crap out.” In 2024, French authorities conducted inspections on 110 companies operating in the textile industry, from fast-fashion to luxury players, a representative from the finance ministry told Bloomberg by e-mail, declining to name the companies. The majority of the results of these inspections were “educational” and haven’t led to fines, the representative added. Fines for companies that fail to comply with the rules are small, at 15,000 euros ($16,850). The requirements in the EU rules look stricter than in France, but lawyers, academics and recyclers who spoke to Bloomberg said that there are numerous exemptions that will let big fashion houses keep destroying unsold products. The law excludes leather goods, including handbags — which are the mainstay of the luxury fashion business, with higher profit margins than most other items — and some limited-edition products. Garments with a logo or trademark that can’t be removed without damaging them are also exempt. “It’s a bit of a perverse stimulant to actually make it more difficult to remove them in the first place,” said Sara Matthieu, a Belgian Member of the European Parliament, who was involved in drafting the law as the Green bloc’s shadow rapporteur. Companies can destroy a garment if repairing or refurbishing it would cost more than destroying and replacing it. They can also destroy something if they tried to resell it — either by themselves or through a charity — and it wasn’t sold within eight weeks. Lobbying suspicions and the luxury industry’s response to the EU rules Many of the exemptions were added late in the process, leading environmental groups to suspect that the industry was able to influence the legislation. Viola Wohlgemuth, a senior expert on textiles and the circular economy at Deutsche Umwelthilfe, a German environmental NGO, describes it as an “absolutely perfect example of lobbying.” Matthieu said that while she wasn’t lobbied at the time the law was written, she suspects the same. “I can’t prove it, but I can’t see why otherwise you would put in those kinds of loopholes,” she said. The fashion industry wields considerable influence, particularly in Italy and France — where almost 9% of the CAC40 index is made up of just three luxury goods stocks. Groups, including LVMH Moët Hennessy Louis Vuitton, Hermès International, Kering, Brunello Cucinelli, Prada and Burberry, employed more than 140,000 workers combined in Europe, according to their latest annual reports. Brunello Cucinelli CEO Riccardo Stefanelli said in a statement that the company “wholeheartedly” welcomes the new EU legislation, “not so much because it changes the way we operate, but because it acknowledges a principle that has always been deeply rooted in our philosophy and that we have consistently upheld.” An LVMH spokesperson said that the EU ban on the destruction of unsold goods “is fully aligned with many of the practices already implemented by our Maisons. This objective has already been addressed for several years through the French regulatory framework, making the new European legislation a natural extension of principles already embedded in our practices.” In its latest annual report, Birkin bag maker Hermès writes that it seeks to have a “recycling trajectory for all unsold products by 2030,” after stating in its 2023 report its aim was to have “100% of unsold goods at group level donated or recycled between 2025 and 2030,” after saying it’d achieved that goal for France that year. Is recycling destruction? The EU rule dividing luxury fashion Unlike the French rules, the EU law classifies recycling as a form of destruction, which has divided people in the business. The Fédération de la Haute Couture et de la Mode, the industry body that organizes Paris fashion week and represents high-end fashion labels, fought for the EU law to allow “high-quality recycling” and hopes to add it during the review period, which ends in 2031. A spokesperson for the FHCM said that the group “supports the ambition” of the EU regulations. Others, such as Simone Cimadomo, project and policy officer at Rreuse, a circular economy social enterprise, say that cutting up clothes to recycle the fabric is still destruction, and the fabric isn’t necessarily reused. “It makes sense that recycling is included because, if you really look at what’s going on mechanically to the product, it is getting destroyed. It is getting processed into a secondary material,” Cimadomo said. “That secondary material should be used. But it is not always used, because it depends on demand for recycled fibers or recycled polyester in another product.” Why EU disclosure rules may hurt luxury brands more than the ban itself Even though there are likely to be many workarounds and loopholes for luxury companies looking to continue destroying their unsold goods, the reporting requirements within the law could ultimately lead to more far-reaching change, experts said. Matthieu, the MEP, says the monitoring will quickly reveal which loopholes are too big. The competitive aspect of the reporting requirements could also be powerful, since the companies will need to disclose publicly in a standardized format which products bombed with shoppers and had to be destroyed. “The transparency requirements could actually be more impactful than the ban on destroying clothes,” said Deutsche Umwelthilfe’s Wohlgemuth. “That is very new because the textile industry tried to keep everything under the carpet – not only regarding environmental groups, but also because they don’t want the competition to know.” By Angelina Rascouet, Jacob Reid and Jillian Deutsch

Sectors

Insights

Company

Destruction ban reveals luxury brands’ problem with unsold stock