LVMH pilots new traceability system as Loro Piana is linked to labour exploitation

Luxury conglomerate LVMH is reassessing its supply chains across all subsidiaries in light of recent court cases involving two of its brands, where workers in the supply chain were allegedly exploited. The company is now piloting traceability technology across its portfolio, with Loro Piana becoming the second LVMH-owned brand to be placed under court administration this week.

The luxury market has recently been rocked by a series of scandals, ranging from labour exploitation to viral misinformation about luxury goods being produced in China alongside counterfeit items.

In a 26-page ruling released this week, the Court of Milan found that Loro Piana—renowned for its high-end cashmere clothing—had subcontracted production through two front firms with no actual manufacturing capacity. These companies then outsourced to Chinese-owned workshops in Italy, which the court determined were exploiting workers.

As a result, Loro Piana S.p.A. will be subject to court monitoring for one year. The court has also appointed an external administrator to verify that the company complies with legal requirements regarding supply chain oversight. The administration may be lifted early if Loro Piana aligns its practices with the law, as was previously the case with Dior, Armani, and Alviero Martini.

Loro Piana is not alone. Units of other major fashion houses—Valentino, Dior (LVMH’s second-largest brand), Armani, and Alviero Martini—have also recently been placed under court administration due to similar issues.

According to court documents, LVMH acquired an 80% stake in Loro Piana in July 2013, with the founding Italian family retaining the remaining 20%. Loro Piana declined to comment to Reuters, and LVMH was not immediately available.

In June, Loro Piana appointed Frédéric Arnault, son of LVMH chairman and CEO Bernard Arnault, as its new CEO.

Italian police investigations have revealed that two Chinese-owned factories were closed, while a third entity was identified as a “paper” company with no actual production capacity. Authorities imposed a combined fine of over €240,000. One factory worker reportedly told police he was hospitalized for over a month after being beaten by his employers when he demanded unpaid wages.

In response to these controversies, LVMH presented its efforts toward greater transparency at its Annual General Meeting in April. The company has begun using TextileGenesis, a traceability platform, to track over 31,000 sample products across major brands including Louis Vuitton, Loro Piana, Dior, and Bulgari.

The system allows LVMH to trace the origin of materials, such as the cashmere used in Loro Piana scarves or the components used in Louis Vuitton handbags.

“Traceability and transparency are the fundamental principles that guarantee the excellence of our products,” said Antoine Arnault, Chairman of Loro Piana and Head of Communications and Image at LVMH, during the AGM.

TextileGenesis founder Amit Gautam confirmed a surge in demand for traceability solutions following the court action against Dior last year.

“Brands are realising that consumers now expect verification, not just storytelling,” Gautam said. “The luxury sector can no longer assume trust based on brand heritage alone.”