Setting the Steppe
On the grasslands of Inner Mongolia, a herd of cashmere goats lazily graze, their pillowy coats shielding them from the elements. These fine fibers from the goats’ winter undercoats are the key raw material in cashmere products—a subset of luxury goods that have always commanded a high price point for their rarity. These products also play a large role in the current and future sales of luxury fashion companies like Kering . However, as climate change wreaks havoc in regions where these goats are raised, Kering and its peers are having to react to new pressures and adapt their sourcing strategies to cope with both reduced quantity and quality .
Goats and Global Warming
The biggest factor contributing to the degradation of both the number of cashmere goats and the quality of their coats is increased volatility of seasonal temperatures and weather patterns. Between 1940 and 2007, the average temperature in Mongolia rose by 2.1°C, creating summers that are both hotter and drier . These droughts subsequently cause severe winters called zud, which in 2010 killed over 9 million livestock animals, either by blanketing their grazing land with snow or from sheer cold . The arid summers also prevent vegetation growth, which in turn prevents both the goats’ necessary weight gain to survive winter and the growth of the softer neck-hairs used in wool. Then, without sufficient food or warmth, the malnourished goats are killed off in huge numbers by the harsh winter.
To make up for this lost revenue, farmers increase the size of their herds the next year, which leads to overgrazing and further desertification—the goats’ sharp hooves tear up the soil and expose it to erosion, while their foraging tears plants out by the roots, thwarting regrowth . The cyclical nature of the animal husbandry industry in conjunction with climate change threatens both the quantity and the quality of the goats’ wool .
Exhibit 1: Climate Change Risk for Cashmere (Darker Green = Higher Risk)
Commotion at Kering
As one of two major luxury conglomerates in the world, Kering owns a number of brands (e.g., Gucci, Saint Laurent, and Brioni), many of which are dependent on cashmere for their products . However, without a consistent quantity or quality of raw cashmere wool, Kering will not be able to continue producing its goods to meet growing customer demand. Given this and the gravity of the current situation, Kering decided to partner with BSR (Business for Social Responsibility) to develop a report that encompasses the major threats to its raw material supply chain and the company’s approach to solving these issues .
In structuring its response, Kering identified three main steps in an iterative process to invest in targeted raw material resilience .
- Identify priorities: Kering recognizes the value of cashmere in its product mix, and they also understand how climate change is affecting the physical geography of the raw material production area and its subsequent impact on the farmers and goats that live there.
- Take action and set targets: Once critical inputs are identified, Kering then lists out steps they can take to build a stronger supply chain, including disaster-warning and risk-management systems for producers in the event of extreme weather events (like zud). To maximize impact, Kering is supporting the Wildlife Conservation Society in the South Gobi region to work with goat farmers on better grazing and animal husbandry practices to prevent desertification .
- Monitor impact: After targets have been set, Kering works with producers to improve the resilience of the supply chain, measure its goals on a periodic basis, and refine targets as necessary.
Fibers of the Future?
Kering has already developed a relatively robust plan, and it has committed to annual reporting of its sustainability goals . Given the widely dispersed nature of the goat farming industry, especially in Mongolia, the company is approaching the problem in a sensible way by partnering with organizations like the Wildlife Conservation Society and the Sustainable Fibre Alliance . Nevertheless, going forward, there are at least three other radical steps that the company can take to ensure not just the availability, but rather, the sustainability of a key raw material.
- Reduce SKUS or raise prices: By reducing its product offering and/or raising prices, Kering would be able to support more sustainable cashmere programs, sending a signal to the market about its position on such materials.
- Genetically-engineered goats: New innovations in breeding have created goats who yield higher production rates of the softer fibers needed for raw wool .
- Technical substitutes: Fabric development is an area where Kering can invest resources to find new textiles that either mimic cashmere’s qualities or replace demand for it in the markets.
Word Count: 777
 H. Crowley et al, “Climate Change: Implications and Strategies for the Luxury Fashion Sector,” BSR Working Paper in collaboration with Kering. BSR, San Francisco. https://www.bsr.org/reports/BSR_Kering_report_Climate_Change_implications_and_strategies_for_the_luxury_fashion_sector.pdf, accessed November 2016.
 D. Dagvadorj et al. “Mongolia Assessment Report on Climate Change 2009,” 2009, http://www.unep.org/pdf/MARCC2009_BOOK.pdf, accessed November 2016.
 Pearly Jacob, “Mongolia: Herders Caught Between Cashmere and Climate Change,” EurasiaNet, June 6, 2016, http://www.eurasianet.org/node/65506, accessed November 2016.
 National Resources Defense Council, “Soft Cashmere is Hard on the Environment,” August 2011, https://www.nrdc.org/sites/default/files/CBD_FiberFacts_Cashmere.pdf, accessed November 2016.
 Kate Abnett, “Solving the Cashmere Crisis,” Business of Fashion, November 26, 2015, https://www.businessoffashion.com/articles/intelligence/solving-the-cashmere-crisis, accessed November 2016.
 Kering Sustainability Communications, “Beyond Our Limits: 2012 – 2016 Sustainability Targets Final Report,” May 3, 2016, http://www.kering.com/sites/default/files/Kering_Sustainability_Targets_Report/index.html, accessed November 2016.
 Sarah Zhang, “Would You Buy a Genetically-Engineered Cashmere Sweater,” The Atlantic, October 26, 2016, http://www.theatlantic.com/health/archive/2016/10/cashmere-goat-crispr/505163/, accessed November 2016.