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- [00:00]
Philippe Schauss
I think all the leaders like myself, they struggle every day with complexity. This is what keeps us away at night in every part of what we do. Welcome to the special English edition of Der Grosse Neustadt, a German podcast series by Sibylla Bach in which she talks to pioneering leaders who, inspired by the World Economic Forum's Great Reset initiative, create revolutionary projects that actually do make our world smarter, greener and fair.
- [00:34]
Sibylla Bach
Today we are joined by Philipp Schauss, CEO of Moet Hennessy and a visionary in sustainable luxury as part of Louis Vuitton Moet Hennessy lvmh, the world's largest luxury group. Moet Hennessy is deeply committed to environmental responsibility. Under Philip's leadership, they launched the World Living Soils Forum, addressing the soil crisis and championing regenerative agriculture. Philippe has also committed the company to ambitious carbon reduction targets approved by the Science Based Targets initiative. With iconic brands like Moet and Chandon, Dom Perignon and Hennessy, Philippe is redefining luxury as both prestigious and purpose driven, setting a new industry standard. Good morning, Philippe. There is a lot to talk about.
- [01:26]
Philippe Schauss
Good morning.
- [01:27]
Sibylla Bach
Good morning. Should we start right with your personal commitment to sustainability? What does it mean to you and how does it guide your leadership at Moet Hennessy?
- [01:43]
Philippe Schauss
Yeah, I would say sustainability is in a certain way a guiding business principle. You want our planet to be sustainable, you want our companies to be sustainable, you want the business to be sustainable. Everything goes together. So sustainability is not just environmental issues. It's about creating a future where business thrives while we positively impact the planet and society. So it's not just about, it is about, but not just about preserving resources for future generations, but it's also about supporting social equity and creating long term economic stability. Now when I think about where our sustainability vision comes from, I mean, we did not invent anything at Moet Hennessy or I did not invent anything. If you see Moet Hennessy is the sum of about 27 different houses or maisons like you named already a few of them Dompaignon or Whitey Chandon or Hennessy or Belvedere Vodka. And these maisons are between, many of them are between 100 and 300 years old. And so if you think about how many generations you need to transmit a business from 250 or 300 years ago to today, it's many, many. And what happens in the transmission is of course, I mean transmission and sustainability is almost saying the same thing. You can only transmit something which is sustainable. And so sustainability has always been part of the Idea of these very measles. So when a father of, let's say Nicolas Renard transmitted Renard to his son, or Madame Clicquot transmitted Veuve Clicot to her son, I mean, what they really transmitted is what? Well, they transmitted, of course, ways of working in which there were social practices. They transmitted a business, they transmitted a customer book, they transmitted a savoir faire a way, know how they transmitted, of course, machines and equipments and buildings and all that. And they transmitted land. And, and the land was at the core of everything. You know, when you, when you talk about the winery, for instance, the first thing they will tell you is how, how much land they have. Or I have a 40 hectare winery, or I have a three actor winery. So land, the land was from the beginning very important. That's where the biggest value was. And so of course land had to be kept in a sustainable way. You had to, to use it in a way that, which should ensure that future generations would be able to do the same thing than you had done in your generation. And so the notion of. And that's where the notion of living soils came, which we are going to talk later on about. But this message, what I'm saying right now is just to say we didn't invent anything. We just borrowed from our predecessors some good practices which ensure that businesses are built for the eternity. And you know, LVMH is a family owned business and the family wants to be there for the eternity and to transmit it over future generations. So that's where sustainability is of course a key to all of LVMH and in particular to Moetensi, which is a very unique business because we go from nature to communities. We start with soils and we finish with restaurants and bars and drinking a glass at home. So sustainability is not a trend, it's not a short term goal, but it's a guiding principle which we have borrowed from the past, which we have made evolve, where we're using new technologies, new ways of looking at things, but also a new sense of urgency, maybe because we know that our planet is threatened and so we need to do all parts of the job to reduce that threat to the planet. So there's more of a sense of urgency. But the principles have always been the same. So we have created. When I joined at my tensity relatively soon, I created a dedicated sustainability department. And in that we defined a program which we called Living Soils Living Together. And this program has really four chapters and the biggest one is about regenerating and protecting our Soils. So that is about practices in viticulture like cover cropping or eco grazing, agroforestry, or creating green corridors for biodiversity. So that's the soil path. Then we have the second one, which is mitigating our climate impacts, which is like everybody else, I guess, finding ways to reduce our carbon footprint. So that can be that. For instance, in distillery in Poland, we are going to use residues from the wood industry to heat a distillery rather than using gas. It's about, of course, buildings which are well isolated. It's about using solar cells and all these things. So that's the climate impact and carbon footprint, of course, is part of that. Then thirdly, it's engaging society. And that is about different actions we have. I mean, a very important one is our commitment to sustainable, to responsible drinking. We know alcohol is a great alcoholic. Our products are fantastic, they are great products, they create wonderful moments, but they should consume in a responsible way. And so that is again, engaging society. We have, for instance, our partnership with the International alliance for responsible drinking, the IART, which we joined in October 21st. It's a leading industry group dedicated to the promotion of responsible drinking. But there are other things. We have also an initiative called Life, in which we launched together with our sister brand, Louis Vuitton, where we helped hundreds and hundreds of people in France, coming from unfavorable backgrounds and who have left the job market who are no longer capable of finding a job to help them create the new life for themselves, to create a new vision for themselves. And that has been very successful. And then the last of the four big points. So regenerating souls, mitigating climate impacts, engaging society. The last one is empowering our own people. Empowering people there it's really about, of course, the developing our people. It's about management practices, it's about, well, being in a company. That is the fourth pillar of this, of this. So sustainability is not a marketing tool. It is important, it's critical, it is a sense of urgency. We have good years like 21, 22 and 23. We have more difficult years like this year. But even when the business environment is more challenging like this year, we remain steadfast in our commitment to sustainability because it is a core responsibility and a driver of long term resilience. So we have a special responsibility and then we strive to be in harmony with our environment, both people and nature, and to live and act according to the philosophy of the original founders of these wonderful maisons.
- [08:56]
Sibylla Bach
Yeah, you have a very holistic approach to business and sustainability and from what I hear, land and its soil are your biggest assets. So, Philippe, could you give us the state of the soil in 2024?
- [09:21]
Philippe Schauss
Yeah, I mean, it's, I mean, figure. Well, first of all, we have to say that soil is crucial on the planet's Terry base. So, uh, you know, more than 50% of the world's living species are found in soil. Uh, one gram of soil in your hand is, has about as much individual organisms than there are human on earth. So it's very, very rich on healthy soil. Soil retains water, filters water, suppose the development of flora and fauna. It's a source of all our foods. It also captures carbon and regulates the climate. And yet, if we believe the studies of the FAO, they have shown that almost 40% of the world's soils are degraded. They are degraded through erosion, through pollution, through salinization, loss of biodiversity, artificialization, and intensive agriculture. Now, the viticulture is one of these industries which have been intensive, this agriculture. And so, so we are corresponsible. And so we have to, we look first at our own land and our viticulture. And actually, agriculture and viticulture represent 23% of carbon emissions and our response for loss of biodiversity. So we look further, what we do and we look at what our industry does, and then we look at the planet as a whole and see what can we do to contribute to that. But if we lose more soils, it will have massive impacts on the climate change and massive impacts on humanity and the ability of the planet to feed the humanity.
- [11:08]
Sibylla Bach
Can I come back to that astonishing number of 40% of soil that's already degraded? What does it actually mean? Let's go, because you are luxury to the Champagne region, in the wine region. What does that mean for the farmers, for you, for all the stakeholders?
- [11:29]
Philippe Schauss
Well, I, I mean, the land in Champagne is not degraded, but it has been impoverished by monoculture. And so what we are doing in Champagne, we are bringing back hedges, we are bringing back bio corridors. Bio corridor is very simple. You have a forest, a small forest, and you have in the middle, and then you have a vineyard, and maybe you have another forest further away. But insects and small animals have no way to go from one side to the other. So you create a corridor for that, so that you use the biodiversity and you develop the biodiversity diversity. So it's about abandoning herbicides, because herbicides, of course, destroy herbs, but destroy also a lot of other living organisms. And so burning of herbicides means that of course, you have to do manual work, you have to replace here besides. But what was done in the past, if you are very wealthy, you use horses and then you get even the manure of the horses to, to. To fertilize your, your vineyard, that is some of the Bordeaux properties. Do that today. If you are at a very high end level. If you are more at a medium level, and we are with champagne, we would use this mechanization. We use electric tractors who will turn around the soil rather than using chemical products. So that's an example. But we also have eliminated more or less the use of insecticides. So because insecticides, I mean they are very useful in agriculture and viticulture to eliminate those insects which bother you, but they eliminate all the other insects as well. And so you have to find ways where you get rid of the insects which are hurting your production. But you are much more targeted. So there are new systems today which do not use this kind of wide range chemicals anymore, et cetera, et cetera. So there's a lot of things to be done. And then we have regions in the world, for instance in Argentina, where the biggest problem will be water and the over consumption of water. So that's another topic. So what you do there, of course you do drip irrigation. So that we have done for many years already. So instead of flooding the, you know, in the, in Mendoza, they would flood the fields with water from the ants and then a lot of the water would get lost. If you do drip irrigation, you only use a fraction of the water to have the same results. But that's not enough. Now we have systems where you, you use drones to see where, which part of urine needs water and which, which part maybe doesn't need water. And you only irrigate the part which needs water so you can again diminish the consumption. So there's always new methods you find to be more effective and contribute to these problematics. Solving of these problematics.
- [14:23]
Sibylla Bach
And in your time as CEO, you decided that soil and the whole ecosystem is so important that you wanted to create the World Living Soils Forum. Can you talk about a bit that.
- [14:38]
Philippe Schauss
Yes. So I mean, of course all the decisions are really collective decisions because when I came in, I was not an expert on these topics. And I'm still not. Even though I can talk a good game when it really comes with details. I also need the help of the experts to help me really understand what's going on. I mean, what I think I brought in though, as a philosophy is a rigorous focus on science. You know, in this entire world of sustainability, there is so much. There are a lot of legends, there's a lot of beliefs. There are a lot of things which are done based on beliefs and not based on science either, because science is missing because we don't have the scientific evidence. So we are doing things believing that they are better, but we have no proof that it works. And so I wanted to say to make Moetanstein adopt a rigorously scientific approach to everything we do. And when we started doing that, we realized how much we were lacking information and data and methods and all that. And we say, well, we need to get in more experts to help us on that. And then we realized there are experts for everything, but they are all around the planet. They do not nearly always talk to each other. There's a lack of a true place where they come together and where they can exchange on that. And we needed it for ourselves, but we realized that it was actually generally. And that's where we created the Living Souls Forum. The Living Souls Forum was about bringing experts together. So we had a few hundred participants. On the last one, we brought them together with 500 participants, plus 102 satellite events we made in China and in Napa Valley in the US we had more than 160 speakers from all around the world talking about all the different subtopics. Some of them we already evoked about biodiversity, about water management, et cetera, et cetera. And we also had some startups present who have developed solutions for helping us there. I mean, this one, which I remember, which we got an award from us, which is a polymer which is 100% biodegradable, which you can put into the soil and it will fill itself with water when it waits like a sponge. And then the sponge will progressively give up the water when it gets dry. So you increase massively the capacity of the soil to retain water. And then in the end it's biodegraded and it's fertilized. So it's actually quite amazing as a solution. I mean, there will be new technologies which are going to help actually try to find this product for my own garden. It doesn't seem to exist yet for small users like we are as individuals. But you see, so the world living, sorry, is about all of that bringing people together and more Tennessee in that world, soaring spons. We are not, we are not acting as an example of whoever does everything right. It's not a marketing conference for my tendency. We are inviting our competitors, actually, we are inviting everybody we want to hear. We are a catalyst. So as a catalyst we bring people together we are not perfect. Nobody's perfect. But the more we can exchange and share ideas and solutions, the better we'll all become. And so that was the whole idea behind this Living Source forum. And it's a complex undertaking we have done now. We're the first embryonic version of this just before COVID and then we did the first real one two years ago, and then we plan to do it this year again. And of course, since business has been more difficult this year, there were questions, should we do it, should we not do it? It's expensive, et cetera. And we say no, we do it because, I mean, climate doesn't stop. Climate change doesn't stop in a year where, where business is not good and the degradation of the stories doesn't stop and all that continues. So it's not a luxury, it's not something you do where you have a good year, you don't do when you have not such a good year, but you do it all the time because it's crucial for the future.
- [18:59]
Sibylla Bach
Yeah, and I remember you were saying in your entrance speech that everybody has seen a lot of cuts in the budget and so on, but this get together of all the stakeholders is just massively important because we need to find solutions and learn from each other. Just very briefly, with one more question going into the forum, because I listened to a few sessions. One was about systemic challenges, then one about ecological corridors, which we talked already about, and then putting nature on the balance sheet. So can you help us a bit understand what that means, putting nature on the balance sheet?
- [19:44]
Philippe Schauss
Well, I would say in the essence it means trying to get numbers behind what you do. And that's not easy. I mean, how do you qualify a soil as being healthy or not healthy? How do you get a KPI there? How do you measure your progress? So that is really what it means. There are things we can measure. We can now measure our CO2 footprint. I mean, it took a long time to get there and we, and it's not yet perfect, but we, we can measure, we can measure water consumption, but how do we measure the biodiversity in the soil? And there, how do we measure, how do you measure other things? So it's, it's the idea that we need to be obsessive with getting KPIs, which will, which will help us to manage measure. I mean, a KPI can be how many units of energy do we use for the transportation of our products per product? So we had, years ago, we were doing a lot of air shipments, you know, when you had an Urgent need for high end champagne somewhere in the world you would ship it by air. But today we say no air shipment anymore. So with that we were able to reduce like the, the units of, of energy per, per km of transport of your, of your, of a bottle of champagne. So, so get as far as possible into creating KPIs which you can actually measure and where you can measure your own progress. That is really what is behind that.
- [21:19]
Sibylla Bach
And you mentioned that you had China and the US in the forum. Do I assume that China and the US have similar problems with the whole soil and the impact of climate change and pollution etc. Or is it different from region to region?
- [21:39]
Philippe Schauss
Oh no, no, no, no, no, no, no, no, no. It's absolutely global. I mean climate change is global everywhere in the world. Harvest are earlier and earlier everywhere in the world. Climate disruptions get bigger and bigger. We have seen it in us, we've seen in China. China has a huge desertification issue around the Gobi Desert, but so have other people. I mean it is a general topic throughout the world. I think the climate impact or the degradation of the climate is a global phenomenon. The recognition of it is not always global. There are people who recognize it more and less. I mean, but if you talk about China just came from a trip in China. I mean there's a huge awareness in China that sustainability is key. And they've done a lot of things. I mean nowhere do you see more electric cars now on the street than China. They've put a lot of efforts in cities to put in trees to lower the temperature and of course cities nicely. I mean there's a lot of efforts there. And so, and so it is in many other regions. So.
- [22:55]
Sibylla Bach
And in Napa Valley.
- [22:57]
Philippe Schauss
Well, in Napa, Italy of course. I mean Napa Valley is a very warm region and they are, they are, they're concerned about climate. Of course, it is super, super important. Their side as well, they are concerned about the climate. And, and hence we had in our property Joseph Felds in Napa. We had invited industry players, members, competitors to be part at a distance of the world Living Soils Forum without having to take the plane from San Francisco to Nice. So there was that idea and I.
- [23:36]
Sibylla Bach
Read in one of your reports also the other frightening number of that, and I'm quoting here, in the future, if climate change pushes average global temperatures up by 2 degrees, 56% of the world's wine growing regions could disappear. And right now we have huge difficulties. We have Azerbaijan, the summit in Baku and they're talking, they probably can't keep the 1.5 degree target. So 2 degrees is not very far.
- [24:14]
Philippe Schauss
Yeah, yeah, yeah.
- [24:15]
Sibylla Bach
What is your. This is a hell of a number. Half of the world's wine growing regions.
- [24:20]
Philippe Schauss
Yeah, yeah. That has been quoted or evaluated by some institute. I mean, we are trying to counter that, you know, by. There are a lot of things you can do to adapt to climate change. You can, there's other things you can do the way you grow the wine. You know, you take a region like Champagne. In the past, Champagne was the most difficult region to create wines because of the cold climate and the wet climate.
- [24:52]
Sibylla Bach
Yeah.
- [24:53]
Philippe Schauss
So everything which was done was done to overcome the weakness of the, of the, of the, the location and to still make wine. And, you know, sometimes they didn't have enough sugar at the end of the hours and so they would add sugar so that they would get, they would get a fermentation, otherwise they wouldn't get a fermentation. So today that's no longer the case. So today we get, we get, we get enough sugar. We get all the, we get all the, we get all the, the best conditions to make good wines, but we have to prepare for even warmer weather. And that means changing some of the practices. The way you cut the leaves, the way you orient the wines, sometimes changing also the biological material, going for different plants, maybe different sipage in the future. So we'll have to adapt to this. But some regions which are very. In the south, like in North Africa also, which were big wine producing regions, may at some point of time find the climate too warm to make wine. And other regions may find that they become part of the area in which you can grow wines. So there will be also compensation on that side.
- [26:02]
Sibylla Bach
But it sounds for me, as an outsider, a bit like a vicious cycle here. One have the droughts, one have the floods, there is not enough water, you have early springs, you got the. And I remember going to Verve Clicquot many years ago, they talked about the April frosts and the danger of it. You have the ever rising temperatures and so on and. Yeah, I don't know, you need a lot of optimism and hope and collaboration. And is that the case? Is that what you are doing and what we are doing?
- [26:46]
Philippe Schauss
Yeah, look, look, look. Yeah, you're right. It is frightening. It is worrying. And, you know, when you read, when you open the newspapers, you wonder why we need to have topics like wars in Eastern Europe or the Middle east or Africa, or why we need other topics which are so secondary and so, how do you say, so Counterproductive when we should all be today obsessed by how do we adapt ourselves? It's no longer about preventing climate warming. It's going to happen regardless. We can minimize its impact of the long term, but we will not prevent it. But why do we not have more energy and time spent on adapting ourselves to that climate change? I mean, all this money going into needless wars could be spent much better into planting more trees, helping reduce desertification, et cetera, et cetera. But of course, that is the dilemma with mankind today and always.
- [27:58]
Sibylla Bach
Yeah, yeah, yeah, that is the. And it would take a whole another hour to talk about that. But I wanted to move you briefly back to the sustainability and how your company is embedded in the larger LVMH policies. And I looked up your work and your pioneering work basically in the luxury industry. And it starts with that. And I just want to give the listeners here a few numbers. 92 LVMH creates its first Environment Department after the Rio de Janeiro Earth Summit. Six years later, Hennessy becomes the first wine and spirits producer in the world to obtain environmental certification. In 2003, you joined the United Nations Global Compact. LVMH sets up already in 2015 with the Sustainable Development Goals of the United nations, an internal carbon fund to finance projects to combat climate change. Now you have the program called Life360 environmental strategy, which sets out targets for 23, 26 and 2030. So you are, are actually a pioneer in the luxury industry, which sounds probably to some people like a contradiction. So you have done all that and still we are fighting. Yeah. With what we just said, the vicious cycle.
- [29:49]
Philippe Schauss
Well, first of all, I would question the. I know people see it as a contradiction, but I would already question that because of the following. I worked for eight years for Louis Vuitton. Louis Vuitton creates fantastic products. Of course there's consumerism behind these products, but they tend to be used far longer than other products because of their high quality. I think particularly about leather goods. I mean, if you have a wallet from Louis Vuitton, when you have had wallets before, you will realize it lasts you far, far longer than simpler, cheaper wallets because of the quality of the materials and all that. So there is an element in. There is an essence in the world of luxury. If you think about leather goods, you think about watches, you think about some pieces of your guardwork, like very nice winter coat or something like that. I mean, in the luxury industry gives you products which you can wear for an entire life and they can be repaired. You know, if you have anything which doesn't work with your Louis Vuitton suitcase or bag or whatever, you can bring it back to Louis Vuitton and it will be repaired, it will not be thrown away. And so in that sense, I would say luxury industry, it has always been part of the genetics of the luxury industry to create products which have long lives and hence contribute in a way to less wastage and less and less carbon footprint, actually. And also a lot of these products are handmade. I mean, you go to the ateliers, you wonder how much handworks they sell there. They use less glues and machines than they use stitching by hand. So there is a. There is. And that's true for almost all the luxury industries categories. So that's the thing I would say in general, it's not true for every single product. But as a general mix, the luxury industry tends to have rather products which are long lasting, long living and don't need to be replaced so often, and so makes you more happy longer, but also have less damage to environment. Up to the point that there is a secondhand market which is thriving in which you can sell the bag or the dress you don't want to wear anymore. There's a very big secondhand market and you can sell it there and somebody else will buy it and continue wearing it. And I think they're discreet. So that is about the idea that this may be, or there could be contradiction between being a leader in sustainability and being luxury. It's not a contradiction, it's part of what luxury is. Luxury is the idea to have things which have a high quality and last for a long time, or maybe for your entire Life, but Life 33 and 60, the program which LVMH created and in which we have our part to play, of course goes much further than that. It's about creating products in harmony with nature. It's about, of course, preserving ecosystems. I mean, everything I described on Wet Tennessee is partially extended to other areas where there is also the link to nature. For instance, in the world of perfumes, when we have our flower fields, which we are using at Dior, the parfum, Christian Dior for the perfumes, we have similar approaches to agriculture and sustainable agriculture. And then of course, the whole element of engaging our stakeholders, whether suppliers, customers, with innovation and also with traceability, which is very important aspect of all that, knowing where your product, your original, your raw materials and your work is coming from and making sure everything is done, been done in the right way. So all that is part of what luxury is about and, and luxury, of course, we sell expensive products and it should be part of an expensive product that the company has done the right thing behind that product. And that's what we believe is, is critical.
- [33:50]
Sibylla Bach
What's, what's your take on the future of the luxury industry altogether?
- [33:58]
Philippe Schauss
Well, my take is that the luxury is about different things, luxury industries about different things. Luxury is about transmitting a craftsmanship to the consumer. It's about this balance between modernity and tradition. Always finding this balance. Again, the tradition being the craftsmanship, the savoir faire, the modernity being the design, the way you market your product, etc. But luxury is also about buying products which last. You know, whether that's a bag from Vuitton, whether that's a sweater from Loro Piana, whether that's a watch from Tag Heuer or a ring from Tiffany. These are products which you want to keep for a long, long time. And you don't need to buy a new one every year because it's wasted. It's. It has lost its qualities. So I think luxury is there to stay also because of these qualities and because of the longevity of the products.
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Sibylla Bach
I agree with you. Still, I want to now dig a little deeper because we talked about the future in which we will have less land and less water. Is luxury then at the end only for a few.
- [35:27]
Philippe Schauss
Well, look, everybody needs to wear a sweater in winter. I mean, do you rather have sweater switch after one year you have to throw away because they are the. The quality wasn't there or you rather have a stretter which you can wear for many years in, in a row because it's such a high quality. Or everybody needs to have a business bag. You want the business bags which you replace every other year or one which lasts you much, much longer. So I don't think that luxury on a category base is a bigger risk consumer of natural resources than cheaper version of these products. On the contrary, I think the more craftsmanship you put into a product, the more quality you put into a product, the longer it will last. And hence on a per year of utilization of the product, you will use less natural resources versus a lesser quality product. Now this is what I'm telling you. I'm not staying with a. I don't have data to make that point, but I think that's a philosophy at least which I see behind the world of luxury.
- [36:38]
Sibylla Bach
Can we focus a bit on the importance of community and transparency? Because Moet Hennessy invests a lot in communities and. Yes, of course, particularly in the Wine growing regions to ensure fair labor practice and sustainable development. So how important is the region and the society for you?
- [37:07]
Philippe Schauss
Yeah, let me give you an example. It is very important because in ultimately we talk about our customers as well. You know, when, when Henry Ford was creating his cars and saying, well, I want to make them at a price that I get, a lot of people are able to buy them, that these are going to. My workers should be able to buy my cars. So it's not exactly the same thing, but the idea is that, yes, the regions are important. They're also our customers. The hotels and restaurants region, the people work there. And of course, there are also customers being our suppliers. You know, we, for instance, in Champagne, we have about 1500 or 1600 hectares of vineyards, but we use the grapes from about 6,000 hectares of vineyards. So the balance is purchased for more than 2,000 families, small families, small businesses. So they are our customers as well, in a way, because without them, I mean, we provide them with a livelihood by buying their grapes, but they provide us with the raw material with which we can do our wonderful champagne. So it's super important that we always think about them as well and that we make sure that they can live from what we buy from them. Then we also make sure that we encourage them to adopt more and more sustainable practices. That's why, for instance, when we buy grapes, we have some special incentive schemes for respecting certain sustainability practices so that they have financial incentive to abandon some chemicals, for instance. So this is super, super important for the whole thing. Then we, of course, we have the harvest, and I will give again the example of Champagne. So we have the harvest in Champagne and we use the. And for the harvest you bring in a lot of temporary labors because it only lasts for three weeks. So there are people who come every year to Champagne to do the harvest. They come from France, but they come also from Eastern Europe. And we have been investing every year into creating new, what we call vendangeoir, which is basically, you could say is a bit like usauce for. For people who come for the vineyards. So it's the accommodation. And we provide them with breakfast, lunch and a dinner. Sometimes we have a little bit of entertainment there as well, and we've invested in that so that they can come in a distant place and not live in a tent or whatever and do the work during these three weeks in a decent way. But then we were thinking, well, that's a bit of a waste, this is it, to have these houses standing there. They are simple houses, but there's still houses to where we house the for three weeks the people who come from the, from the for the harvest. And when the Ukraine invasion started, a lot of Ukraine refugees came to Western Europe and we decided to make this vendongoir available for refugees in Champagne. So that was a whole project which we involved our team with teams with where with the exception of the three weeks during the season of harvest, we made a number of these houses available for Ukraine refugees. A kind of a transition space before they could go to some more permanent place. So this example of trying to see what can you do and sometimes it's actually something easy you can do if you think about it.
- [40:46]
Sibylla Bach
I want to take you back to the business model combining business with the new challenges and you signed up to the Science Based Targets initiative and you at the UN Global Compact can you tell talk us through this transformation. This is not done overnight and you got ESG department and so on. What does it take really to implement those new standards in time and also financially?
- [41:27]
Philippe Schauss
Well there is a cost of course in terms of time and financially. So it takes time of course and you cannot do everything at the same time. So one difficulty we encountered from the beginning and I explained already early on and I explained why we created the world Livingston was are we sure that what we do has measurable impacts? Are we doing the right thing? You know, just think about if you have hundred thousand euros to invest, is it better to invest it in isolating the building where you have an office building, where you have your staff, Is it better invested in putting solar cells on the roof of that building or another building? Is it better to invest them in buying electric vehicles instead of oil driven, I mean gasoline driven vehicles for your tractors or whatever? I mean where do you get the most bang for your buck in terms of environmental impact? That is a question I constantly ask and it's one where I'm starting to get answers. But it's difficult to get answers. I mean just think about your service, the consumer. When you are wondering whether you should buy an electric car, a hybrid car or a, or, or, or, or, or keep your old diesel car. What is the best decision in terms of the impact on the environment? It's not so easy to answer and everybody's scratching his head. So we have this question at the multiplied by all the different tools and situations and geographies and all that. So the idea that you constantly try to challenge whether if I can spend that much, so if I can spend 100 million euro a year on all my environmental initiatives including given, giving, giving incentives to my viticultural supplies to improve the ways of working, including using biomass to fire your distilleries, including isolating some of your buildings better and use less electricity to heat them or oil to heat them, including all the other things we do. If you have hundred million to do that, where is that 100 million spent the best so that the overall result you get will be the best possible. And sometimes people come and they try to improve marginally something which is already quite good and you say stop, I rather have you put that money into place where we get more out of it or where we are further away from or where there's more potential improvement. So the notion of the return on money invested, but not return in terms of savings but return in terms of impacts on the environment is very poor. But then how you compare a program where you increase biodiversity to a program where you reduce water consumption to a program where you improve your carbon footprint. Not so easy to say where. So of course at some point in time it's just safe to use your judgment and balance out. But ideally you want to go more and more towards being able to have one currency for all of that and being able to say, here's where I get the biggest bang for my buck.
- [44:45]
Sibylla Bach
I remember previous guests were also the CEO of the UN Global Compact and the ISSB Chair and both of them talked about similar things. And right now, from how I understood it, they are still very open also to help. They're very open to obstacles that small medium sized companies face and, and big ones. What would you say are the major obstacles from all the meetings you have with suppliers and so on? What comes up most?
- [45:30]
Philippe Schauss
Well, the major obscure, the major obstacle is really sheer complexity of the whole topic. It's an objective complexity. I think you find a lot of goodwill everywhere. But the complexity and then of course the cost, the cost situation and the cost situation is also one which is evolving. Like every innovation, when you launch any new innovation, initially it's very expensive and then you find ways to make it better and simpler. And then over time it becomes cheaper and cheaper and cheaper. And at one point of time it becomes perhaps cheaper than what you did before, but with much better environmental impacts. So we also have to give time to the learning curve so that we get better. And then of course sharing information, I mean there are solutions. People do ask how do you share anything? How do you know that somebody has already moved much further on the learning curve than yourself and how can you benefit from his learning curve? That's again, why we did the world living soil so that we can have people sharing on their own learning curves and thus accelerating each other's learning curve. Because in the end it's about that. I do not believe that these practices in long term will be much more expensive than once we had so far. But in the transition they are more expensive for sure. And the faster we move up the learning curve, the shorter there will be that transition and the farther we will be able to go. I mean, think about this, what I told about this, this new polymer which is biodegradable, you put in the soil and fill itself with water and all that. I mean, this is actually a very cheap solution. Yet to retain your water, it might be much cheaper than buying, than building water pools to keep the water or whatever, which we usually do. It might be much cheaper than that and has a lot of other benefits. So I mean, the cost per unit of saving, whether it's CO2 or whether it's water, whatever, is very, very important factor. And we don't see that enough when we are being presented products or ideas or when we are learning we are not. That's where I come back to the, you know, by training, I'm an engineer, I like to measure things. And we are not measuring sufficiently yet the impacts of what we do and how we move up this learning curve.
- [47:59]
Sibylla Bach
And any idea how to do better.
- [48:02]
Philippe Schauss
Well, do what we do, share with others, have exchanges, have encouraged industry to move on. Do what you do right now by interviewing me as one person from the industry and maybe somebody will listen to this and find an idea in what I said and maybe I will listen to it in some of the other record and find another idea. I mean, talk about it, I mean sharing and talking and move away from being too ideological on this and be rather more pragmatic in finding the right solutions.
- [48:36]
Sibylla Bach
And because you are a pioneering leader and you mentioned complexity, complexity is really the issue of our time. How do you personally in your position deal with complexity? And is there anything you can share? What people, what other leaders can pick up?
- [49:04]
Philippe Schauss
I think all the leaders like myself, they struggle every day with complexity. This is what keeps us away at night in every part of what we do. And sometimes we are at the source of that complexity because we ask for things to be done, we ask for repls, we ask for procedures to be kept. Sometimes it's the sheer nature of what we are dealing with which creates that complexity. Sometimes it can be some misguided government actions which create norms or rules which create unnecessary or which are unnecessary, complex or which could have been done in a less complex way. Sometimes it's people who are looking for 100% solution rather than going with an 80 or 90% solution which is often far less expensive and complex. It keeps us up day and night. How do you deal with complexity? Well, by being transparent within your organization as to what you want. Giving your organization a vision, what are you trying to achieve, how are you achieving it? And giving the right, the right, I don't want to say incentives because it's not all about money, but the right missions and objectives which are consistent between different parts of the organization so that they don't work against each other, but they go, they work together with each other.
- [50:32]
Sibylla Bach
And how do you keep your organization together in a time of this massive transformation?
- [50:40]
Philippe Schauss
Well, I think everything we talked about in the last hour is when you talk about that to your team, I mean it's a very powerful element of motivation to work for us and with us. You know, when, whenever I have, I do a lot of town halls. I just came from a trip in Asia where I in every country I had a town hall with our local teams. And the sustainability question comes out all the time. And especially our young people, they want to see that the company they're working with is doing something. And so I think it's rather this whole topics rather contributes to bring people together because there is a overriding goal which they can all accept and be motivated by. So of course, and they can be very critical and we'll look at what you do and what you say and whether you live to the standards which you have set up yourself or not. So it's very key there that we promise what we can keep and that we keep what we have promised and that we are transparent and that we have a vision, that we are humble, that we admit that we are not perfect and far from being perfect, but that we move out of the mediocrity in which you may have been at some point of time to become better and better. And that is part of our day to day job.
- [52:10]
Sibylla Bach
Yeah, yeah. And of course also to show some vulnerability and transparency and that anybody can see. There is a leader who knows what he's doing and if he doesn't, he will call others and give them a seat at the table to solve the problems together. And even you doing all that, nobody can fix all the problems. And I looked for example at. Oh God, I worked my way through the entire LVMH annual report 23 and I saw good things and not so good things, but we need to address them and talk about them. Like for example, I noticed that at your place the energy consumption you reduced by 13%, which is massive, but at the same time greenhouse gas emissions went up by 9% and so on. So it is never just one road, one road to take, is it?
- [53:20]
Philippe Schauss
Yeah, and it's, you know, and then this, this, it is super difficult to bring out a wide KPIs. For instance, do you look at the consumption of energy or the CO2 or greenhouse gases as an absolute number or do you look at it as a number per unit you produce? Because if you, if you, if you have been selling more of a product, if you sell 10% more, but you increase your greenhouses by 5%, then you could say it's not good that you increase by 5%, but it's good that you reduce actually by 5% per unit produced. Or if you acquire a company, you acquire the sales of that company, but you also acquire the greenhouse production, the greenhouse gas production, you acquire the energy consumption. So this is what makes it so difficult that we, of course this can all be very good excuses why we're not progressing well, because, oh no, but this is always a reason why, oh, it is bad because we did this, we did that. So it can be an excuse. But sometimes it's really difficult because the structure of your business changes. And then so internally you have to find ways where for given units, where there's kind of a like for like comparison where you say forgiven unit, I want to be better than before. In sage terms. We talk often about like for like terms. You know, when you have a network of boutiques and you say, oh, the sales went up X percent last year, but on the like for like basis actually went down by 3% because I added that many more stores, so they brought more sales, but the stores on a like for like basis did not go up, the sales went down. So you always try to look at like for like to understand your performance. What is a bit similar in the environmental aspect is that you have to look at like for like data to, to really measure whether you are betting getting more performance, your performance is improving, or whether maybe it's not improving. Having said that, we give, we tend to give ourselves objectives which are not on a like for like base, which are more on total based. And then sometimes we struggle because they were kind of too ambitious given that the structure of the business has evolved.
- [55:37]
Sibylla Bach
Yeah, that's very important. Can I ask you two more questions before we end? Because I know your Time is very valuable and you need to go. But just two more questions. One would be, would really just focus on your industry. What do you envision as Moet Hennessy's long term legacy within LVMH and the wider industry? Can you give us an outlook?
- [56:05]
Philippe Schauss
The key thing in luxury is that you are the transmitter of tradition from the past to the future. And that is very, very important because it's part of living in a healthy world is also we keep our traditions and we use that further. So whether that's winemaking, whether that's leather goods making, whether that's perfumes and all that, and in order to keep these traditions, we use natural resources. And if our legacy can be that we get better and better at using these natural resources to create wonderful products which bring happiness to people, which bring joy, but we also bring them products which they can use for a long time and they don't need to replace them regularly and buy more and more and throw things away, then I think we as luxury industry leave a good legacy to the world, both in bringing happiness and joy, in doing it with a reasonable usage or an ever diminishing use of natural resources and still bridging the past and the future and giving the people, the consumer the reassurance that he's wearing or using something which was done in a way which carries in itself a few hundred years of tradition. I mean we talk about wine, it's like a few thousand years of tradition. I think that is the legacy we as an industry give. And then when you look at individual brands, I always say to my team, I'm about to move on in my own professional life. I'm going to move to non executive roles. So I'm going to hand over my role at what tendency to my successor at the end of January and then I will move to, to non executive roles. I want to get into this new phase of my career. And then of course people say well but, but this is why are you living and, and, and you are important and all that. And you say, well, you know, our brands, the, the, the, the, our brands are eternal. We want people to still be drinking non perignon in, in 200 years from now. They're eternal. They've been existing for 200 years. They will continue to exist for 200 years. They will work differently, they will be better at a lot of things. They will solve progressively lot of the topics which we have addressed, but not entirely solved. But the important is that in the life of these brands, we the leaders, we are ephemeral. Nobody will remember us in 200 years or 100 years, but we'll have contributed to the eternity of the brands. And the eternity of the brands is also linked to sustainability. It's also linked to being a good contributor to the planet. It's also linked to adding to the planet our plan to be more sustainable and to bring a curve into this curve of destruction of the soils, of destruction of the atmosphere, of destruction of the climate that we kind of get this, contribute to this being progressively resolved so that in the longer term, while people cannot only drink Dom Perignon, but they can also enjoy a nice climate and they can also enjoy great soil to produce great food for them. And that's what I think we are there to do.
- [59:23]
Sibylla Bach
I think this is a wonderful way to end this great conversation. And contributing to eternity is especially. I like that. So I'm sorry to hear that you leave that place, but I'm glad that I had the chance to talk to you. Very, very happy about that. Thank you very much for really a wonderful conversation. It is important to actually get this complexity of the luxury industry and to understand the purpose and. Yeah. And I think you delivered on all of it. And I can only say thank you very much and I wish you all the best for the future and lots and lots of success.
- [60:11]
Philippe Schauss
Thank you, Sibila. Nice to talk to you. Bye. You've been listening to a special English edition of De Gorse Neustadt, a German podcast series by Sibylla Bart in which she talks to pioneering leaders who are committed to making our world smarter, greener and fairer. For more information, please visit www.sibyllabaden.com and the official site of the World Economic Forum.