Christian Dior`s Violation of Supply Chain Ethics: A Threat to the Brand?

Case Code: BECG196 Case Length: 7 Pages Period: - Pub Date: 2025 Teaching Note: Available

Price: Rs.400 Organization: Christian Dior SE Industry: Cosmetics & Toiletries Countries: Italy Themes: Operations and Supply Chain Management , Brand Equity,Supply Chain Management,Ethics in Business

Abstract Case Intro 1 Case Intro 2 Excerpts

Excerpts

Why did dior come under the scanner?

In the 2010s, Italian authorities began to significantly increase their monitoring of companies for systemic labor exploitation. Under Italian law, companies that outsourced production were required to conduct proper due diligence on their suppliers. In the past, legal actions taken by Italian magistrates in worker exploitation cases had considered only a company’s direct suppliers. However, the Public Prosecutor’s Office of Milan (Procura della Repubblica presso il Tribunale di Milano) expanded their scope to include subcontractors within the reach of the law. They began applying a legal provision – originally intended for businesses infiltrated by organized crime . The legal provision in question allowed such companies – whose subcontractors were found to be involved in labor exploitation – to be placed under court or judicial administration, with special commissioners appointed to manage their operations..

Dior Gets Mixed Up In Labor Exploitation

In 2024, a series of investigations by Italian magistrates, especially the Milan prosecutor’s office, uncovered various cases of labor exploitation in the Italian fashion and luxury supply chain. Following this, Dior too came under the investigation’s scanner..

Can dior’s goods be considered “made in italy”?

At the center of the entire controversy was the key question – had Dior deceived customers about the ethical nature of its production practices? Analysts believed that Dior had not adhered to its commitment to ethical standards and social responsibility, especially in relation to labor conditions at its suppliers. They thought that the court ruling called into question the much touted environmental, social and governance (ESG) policies of luxury companies such as LMVH. In 2022, LMVH had received a triple “A” award for sustainability from the non-profit Carbon Disclosure Project (CDP) for sustainability – one of only dozen companies out of 15,000 companies to receive the rating..

A Repentant Dior

In the immediate aftermath of the raids, Dior stated that it condemned “in the strongest terms these acts contrary to its values and the code of conduct signed by these suppliers.” It further added that it had cut connections with the suppliers in question. Dior also asserted that no new orders would be placed with the concerned suppliers and that teams were working to strengthen existing procedures, given that the suppliers had “clearly succeeded in concealing these practices, despite regular audits...”

Is the issue reolved?

In February 2025, the Milan court announced that it was providing an early termination of the special administration imposed on MDS. According to a statement issued by the Milan court, it had taken the decision to end the special administration ahead of schedule, as it was satisfied with the implementation of the necessary organizational models and supplier oversight procedures that had been implemented by MDS..

Exhibits

Exhibit I: Christian Dior SE Key Financials Q1 2024-Q1 2025

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