Luxury’s Dirty Secret: Why Burning €3 Billion in Unsold Inventory Is Actually

If you believe Hermès is “sustainable” because they use organic cotton in a single scarf line while incinerating last season’s leather goods to protect brand equity, I’ve got a bridge in Knightsbridge to sell you.

The luxury industry is built on a contradiction so fundamental it would make Kant weep: To maintain the scarcity that justifies 70-80% gross margins, luxury brands must systematically destroy value. And in 2025, that contradiction is collapsing into scandal.

Business of Fashion’s year-end review called 2025 “a worrying and controversial year for luxury sustainability”. Not because brands stopped claiming to be green because the lies became too obvious to ignore.

The Mathematics of Destruction

Here’s the industry secret they don’t teach at traditional business schools: Luxury brands deliberately produce 20-30% excess inventory specifically destined for outlet and off-price channels from the production planning stage.

Bain & Company’s analysis confirms this isn’t overstock it’s planned secondary production. Kering sold its outlet division, The Mall, to Simon Property Group for €350 million in January 2025. That valuation assumes continuous inventory flow. You can’t have circular fashion and outlet empires simultaneously. The math doesn’t work.

Yet LVMH’s LIFE 360 program promises carbon neutrality. Kering publishes Environmental Profit & Loss statements. Prada invests in regenerative agriculture. Meanwhile, Italian labor inspections reveal Loro Piana-linked facilities employing undocumented workers in conditions “incompatible with Italian labor law” while holding sustainability certifications.

This isn’t greenwashing. It’s structural hypocrisy as business model.

Why They Have to Burn It (And Why They Lie About It)

Luxury economics demand scarcity. If discounted last-season bags flood the market, full-price mystique evaporates. So brands destroy inventory or dump it in opaque outlet channels with different materials and construction than primary collections.

The sustainability reports never mention this dual production system. They track “environmental impact across collections” without distinguishing between primary goods and outlet-destined inventory. It’s certification theater: Facilities receive advance notice of audits, coach workers on responses, and present curated evidence while actual working conditions remain exploitative.

As one supply chain analyst noted: “The procurement paradox is that luxury brands impose rigorous sustainability standards while purchasing strategies make compliance economically unfeasible”.

The Gen Z Reckoning

The most dangerous trend for luxury isn’t recession it’s generational skepticism.

Millennials and Gen Z drive 85% of luxury sales growth. They also demand “sustainable practices, messages, and products”. When they discover that the “sustainable” Gucci bag they bought was produced in the same facility as fast fashion using planned obsolescence models, brand equity doesn’t just dip it crater.

Witness the collapse of “productive ambiguity.” For years, luxury could claim environmental virtue while operating destruction-based models because verification was weak. But 2025 saw systematic exposures: Indian NGOs revealed debt bondage in cotton facilities supplying certified “ethical” brands. Italian courts documented sweatshops producing for sustainability-flagship labels.

The veil is lifting. And brands that taught “sustainability” as a marketing module rather than an operational reality are facing existential credibility crises.

What Real Luxury Education Looks Like

At London School of Business, we don’t teach sustainability as a PR strategy. Our Level 3 Diploma in Luxury Brand Management confronts the contradiction head-on.

We teach students:

  • The Outlet Economy: How secondary markets actually function (and why they’re incompatible with circular principles)
  • Certification Failure: Why audit systems are designed to protect brands, not workers or environments
  • Ethical Procurement Mathematics: The impossible equation of 3-7% annual cost reductions alongside sustainability investments
  • Transparency Strategy: How brands like GANNI survive by admitting “it is impossible to be sustainable because the core of fashion is newness and consumption”

We don’t teach you to write ESG reports that satisfy investors while obfuscating reality. We teach you to build luxury businesses that survive the coming transparency revolution.

The Inevitable Collapse of Greenwashing

2025 marked the beginning of the end for luxury’s sustainability theater. Asket and E.L.V. Denim publicly abandoned sustainability claims entirely, citing “certification fatigue and consumer skepticism”. The EU delayed greenwashing regulations under industry pressure, but the direction is clear: opacity is becoming illegal.

Smart luxury brands are pivoting from “sustainability storytelling” to radical transparency. Not because it’s morally superior because Gen Z will pay premium prices for brands honest about their limitations, but they will crucify brands caught in lies.

Teaching the Truth

The future of luxury belongs to managers who understand that you cannot simultaneously maintain 70% margins, destroy excess inventory, and claim circular economy principles. Something has to give.

Our Diploma in Luxury Brand Management prepares you for this reckoning. We teach supply chain realities, not sustainability fantasies. We examine case studies of brands that tried to greenwash and failed. We explore genuine circular models even when they threaten traditional margin structures.

Because in 2026, “sustainability” won’t be a marketing department function. It will be a survival competency.

Don’t learn luxury management from institutions teaching 2015’s greenwashing playbook.

Enroll in the Level 3 Diploma in Luxury Brand Management and learn how to navigate luxury’s real future destruction, contradictions, and all.

LSBUK: We teach business as it is, not as the PR departments pretend it to be.