Luxury’s Italian Supply Chain Reckoning Isn’t Over

The Business of Fashion Podcast

The episode revisits the 2024 investigation into exploitative labor conditions within the Italian luxury supply chain, specifically around M

Key takeaways

• Milan prosecutors uncovered sweatshop-like conditions in factories supplying major brands like Armani and Dior.
• The 'Pulcinella secret' describes how exploitative practices are an open secret in Italy because they are convenient for production speed and cost.

Main topics

• Italian luxury supply chain scandals
• Labor exploitation and worker rights

Notable quotes

Everyone knows, no one tells because it is convenient to have them exist.

Conclusion

The episode concludes that without fundamental changes to business mod

Transcript preview

Speaker 1 (0:08) Hello and welcome to The Debrief from the Business of Fashion, where each week we delve into our most popular BOF professional stories with the correspondents who created them. I'm Senior Correspondent Sheena Butler-Young. Speaker 1 (0:23) In November 2024, here at BOF, we examined a scandal that challenged one of luxury's biggest selling points, the promise of craftsmanship and quality behind the Made in Italy label. Investigators in Milan had uncovered exploitative conditions at factories supplying some of fashion's biggest names. Workers were reportedly earning just a few euros an hour. In some places, safety protocols were removed to speed up production, and in others, laborers were putting in 15-hour workdays while living in degraded conditions. The revelations raise questions not only about individual factories, but also about the way luxury brands manage their Italian supply chains. Nearly two years later, the industry has taken some steps, but the story is far from over. Joining me is BOF Global Markets Editor Sarah Kent, who co-wrote our latest report and joined us for that original conversation. Sarah, welcome back to The Debrief. Thanks so much for having me, Sheena. It's great to be back. And it's great to be back from maternity leave also. Congratulations. We're so happy you're back. I'm happy to be back, Speaker 2 (1:24) too. It's been a while. I'm sorry if I'm a bit rusty. Speaker 1 (1:28) No, I'm sure you're fine. I want to, before we get into what has happened in the last two years to. supposedly write the course. I want to go back to the investigation that first brought a lot of these things into public view. So take us back to 2024. What was that investigation? What were the top line revelations? So back in early Speaker 2 (1:47) 2024, a prosecutor in Milan began bringing cases against fashion brands. And the first one kind of went under the radar because it targeted a brand that is known in Italy, but didn't have such a big international footprint. And then the second brand he went after was Armani. And that really got people to sit up. And then the third brand was Dior. And suddenly everyone was like, oh my God, what's happening? And what the... investigations had revealed were that these very, very prominent brands who are considered some of the most elite in the industry had buried in their supply chains factories that were essentially functioning much like you would imagine a sweatshop. And these factories were not in far-flung places. They were in Italy. They were on the outskirts of Milan in, you know, the backyard for these brands in terms of high-end manufacturing. And this had happened, the brand said, without them being aware of it. So it raised a number of different issues. One, were the brands culpable for this? Two, if they weren't, how was it happening that these factories were showing up in their supply chains without them knowing? And three, if these factories were in their supply chains, Were the products that they were selling for such high prices? And remember that in 2024, we're at a point of peak inflation for luxury products. Were they really worth it? So it created this kind of perfect storm for the luxury industry around how they operate, how these big brands operate. Speaker 1 (3:30) One of the phrases that I remember from that time was this whole thing of like supplier of supplier. You mentioned that these... These conditions were at factories that were deep in the supply chain. Can you talk a little bit about this, I guess, a lack of visibility that the brands seem to have, which to your point about whether or not they were culpable, like it's kind of, I mean, I think that's interesting that you can say you don't know and therefore, like, I think that's just as problematic, but maybe you help us understand. Well, so the luxury supply chain Speaker 2 (3:59) is really complex. You know, one of Italy's great strengths as a luxury manufacturer is You have an extreme concentration of all of the expertise you need to make these incredibly high-end products. But one of the complexities of this is that that expertise, in many cases, is distributed in lots and lots of micro suppliers. And so you end up with this very complicated supply chain where a brand may work with one large manufacturer, but that manufacturer will be sending out to many other smaller factories. for part of the work. And sometimes this work can be very specialized, like attaching the brass buckles to a handbag, for instance. That may happen in one specific location, and then the handbag will be sent back to a more central location to be assembled in other ways. Within this, you can see how it would be easy for companies to lose track of where their supply chain begins and where it ends. Speaker 1 (5:06) The other thing we spoke about this investigation two years ago was you described the exploitation in Italian manufacturing as an open secret. What did you mean by that? And I know this is sort of like the the tension here is to to what extent is it a bug in the system? Is the system working as designed? Is this a bug or working as intended? Speaker 2 (5:27) So I remember when I first started reporting this, and I think I raised this last time, too. I learned this phrase that I'd never heard before. It's an Italian phrase. A Pulcinella secret. And it kind of references this character in traditional Italian Renaissance comedy who was known for being a big mouth. You don't tell this person a secret because it's not going to be a secret very long. And I speak to people in the Italian supply chain and they were like, yeah, the fact that these factories exist is a Pulcinella secret. Everyone knows, no one tells because it is convenient to have them exist. And it's for a variety of reasons, partly just the way the supply chain has evolved over time. But at its heart, when you really press people, they say it's because of the price brands are willing to pay for products and the speed and flexibility at which they want them produced. And that puts a degree of pressure down the supply chain where, you know, you may end up in a situation in a pinch where you need a supplier. who can do things cheaply and quickly. And so you quietly do what is convenient. And that may not be a supplier that a luxury brand would normally want to work with. Speaker 1 (6:39) But and I also don't want to totally excuse Speaker 2 (6:42) the luxury brands. Like if you look at the investigations as they've