Evaluating a company's impact (the case of Hermès)

This week’s read time: 3 minutes

You are reading Green Digest Impact, a weekly newsletter that provides in-depth analyses of companies’ environmental and social impact.

OUR APPROACH

Central to our narrative is the principle of double-materiality, which recognizes that a company's impact is twofold: it affects both the environment and society at large, and in turn, these external factors influence the company's financial and operational performance.

While traditional ESG assessments focus on the latter, we aim to examine companies' direct impacts on these factors. In pursuit of this, we introduce a unique scoring system that quantifies a company's impact.

The insights and analyses presented in Green Digest Impact are brought to you by a partnership between Green Digest and Impaakt, a Swiss-based impact data provider. Contact Impaakt here to explore how they can assist you.

THIS WEEK’S COMPANY

Hermès

This week we dive deep into Hermès environmental and social impact.

Hermes, established in 1837, is a French luxury design house and manufacturer best known for its Birkin bags. It specializes in leather goods, silk goods, lifestyle accessories, home furnishings, perfumery, jewelry, and watches.

Some interesting facts:

• The Hermès Birkin bag was born from a chance encounter on a flight in 1984 between actress Jane Birkin and Hermès CEO Jean-Louis Dumas. During their conversation, Birkin shared her desire for a bag that was both practical and stylish, inspiring Dumas to design what would become an iconic accessory.

• Hermès bags often fetch astronomical sums at auctions. In 2022, a Hermès Himalaya Retourne Kelly 25 bag was sold for €352,800, making it one of the most expensive handbags ever.

COMPANY’S IMPACT

Hermès’ overall impact score

Hermès has a general impact score of -0.59 (on a scale from -5 to +5). Its impact is spread across 10 UN Sustainable Development Goals (SDGs) and 10 topics, split between positive and negative analyses.

In the socio-economic sphere,

Hermès has a long-standing reputation as one of the most prestigious and exclusive luxury houses in the world. The company is renowned for its exceptional craftsmanship and timeless design, producing durable and functional items that are often passed down through generations and enable their customers’ self-expression and uniqueness. As of 2023, Hermès operates 294 retail stores worldwide, distributed across more than 50 countries, including key markets such as the US, France, Japan, and China. Additionally, Hermès’ direct sourcing of 100% of its silk from over 2,000 smallholder farmers supports small businesses, while its reliance on over 100 suppliers, primarily in Europe, strengthens the local economy. The company also employs approximately 22,000 people, offering salaries above the industry and country average.

Hermès produces 55% of its goods in-house and sources 98% of materials from European suppliers, where labor control and monitoring are stricter, reducing the company’s exposure to human rights violations. However, its sourcing of exotic leather and other materials from countries like Brazil, Mongolia, and China highlights gaps in supply chain transparency. In the KnowTheChain’s traceability and risk assessment index, Hermès scored just 12/100, highlighting significant shortcomings in its supply chain transparency and due diligence practices.

Environmentally,

Hermès emits 666,000 tonnes of CO₂ equivalent annually, comparable to the electricity use of over 138,000 homes. The company consumes 608,000 m³ of water across its 75 manufacturing sites, with 9 located in water-stressed areas, though these account for just 0.1% of total water usage. Hermès also generates 16,300 tonnes of waste annually, with 53% sustainably managed through reuse, recycling, and waste-to-energy initiatives. Additionally, 83% of the timber and 100% of cattle products sourced are deforestation- and conversion-free. Hermès also processes over 1,000 tonnes of raw materials annually, requiring tens of thousands of hectares of land.

_{*The impact score is current as of November 2024 and may be subject to changes as it is continuously updated.
**You can find details about the scoring methodology here and the information sources here.}

ESG VS IMPACT SCORE

What is Hermès’ ESG rating?

For comparison, Hermès has an AA rating in MSCI's ESG evaluation.

However, ESG Ratings from MSCI ESG Research are designed to measure a company’s resilience to financially material ESG risks and they provide a window into one facet of risk to financial performance. They measure how effectively companies manage ESG risks, not their impact on these factors.

SCORES BY SDG

Hermès’ impact scores by SDG

Positively (and by weight), the company scores the highest in the Good Health and Well-being SDG (+2.53), followed by Partnership for the Goals (+2.37), and No Poverty (+2.38).

Negatively, the company scores the worst in the Decent Work and Economic Growth SDG (-1.55), followed by Responsible Consumption and Production (-2.49), and Life on Land (-1.55).

*the analysis takes into account the weight of the SDGs

Hermès' impact on SDG 8 (Decent Work and Economic Growth) is dual-faceted. On the positive side, the company creates job opportunities, which supports economic growth in the regions where it operates. However, it also negatively influences the goal due to concerns over its human rights policies, particularly regarding labor conditions and supply chain practices, which have faced criticism for not fully aligning with international standards.

CONCLUSION

Materiality Map & Final Words

So, Hermès’ key social and environmental impact lies in …

its long-standing reputation as a symbol of luxury and craftsmanship, creating high-quality, durable products that emphasize self-expression and are often cherished for generations. Through its operations, Hermès supports smallholder farmers, strengthens local economies, and provides above-average salaries to its 22,000 employees.

However, Hermès faces challenges with supply chain transparency, particularly in its sourcing of exotic materials from regions with weaker labor and environmental controls. Its low score on supply chain traceability highlights significant gaps in ensuring ethical sourcing practices. Environmentally, Hermès demonstrates some progress, with a majority of its timber and cattle products sourced sustainably, but its operations still generate substantial CO₂ emissions and waste. While water use in stressed regions is minimal, the company’s reliance on large amounts of land and raw materials adds to its environmental footprint.

With an overall impact score of -0.59, Hermès reflects a balance between its contributions to craftsmanship and local economies and the critical challenges it must address in supply chain transparency and environmental sustainability.

If you’d like to delve deeper into Hermès’ impact, you can explore it here.

If you'd like to learn more about the scoring methodology, you can do so here.

Do you have a specific company you'd like us to cover? Send your suggestions to [email protected]

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