Recent investigations have uncovered alarming labor practices within Italy’s luxury goods supply chain, implicating Dior and Giorgio Armani. Despite passing multiple formal audits in 2023, AZ Operations—a Dior sub-contractor near Milan—was accused of exploiting undocumented workers under sweatshop-like conditions. Court documents revealed that AZ Operations was effectively a front for another business, New Leather Italy.
Manufactures Dior, Dior’s Italian production arm, has come under judicial oversight since June 2024. Prosecutors criticized its inadequate supplier audits, noting that inspections often failed to uncover glaring issues. For example, audits conducted by compliance firms like Fair Factories Clearinghouse and Davide Albertario Milano srl certified AZ Operations as compliant, despite subsequent police investigations exposing worker exploitation.
Italy produces over half of the world’s luxury leather goods, relying on external contractors for cost efficiency. However, insiders and experts, including Cardiff University’s Hakan Karaosman, argue this outsourcing model inherently risks labor violations. Audits are often pre-announced, enabling suppliers to temporarily hide illegal practices, such as underreporting hours worked or employing undocumented workers.
Luxury giants like LVMH, Dior’s parent company, have touted their commitment to human rights and sustainability. Yet, revelations of exploitative practices highlight gaps in oversight and potential reputational risks. While brands like Armani claim full cooperation with authorities, investigations continue into the systemic failures of Italy’s luxury supply chain.
As scrutiny intensifies, calls for stricter regulation and transparency in supplier auditing are growing, underscoring the urgent need for ethical reform in the luxury fashion industry.
Source: https://www.reuters.com/business/retail-consumer/inside-luxury-goods-broken-audit-system-2024-12-31/