Luxury’s Italian Supply Chain Reckoning Isn’t Over

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Background:

In 2024, investigations by prosecutors in Milan uncovered factories in the supply chains of major luxury houses operating under conditions more commonly associated with sweatshops. Workers were found to be earning just a few euros an hour, working as long as 15-hour days and, in some cases, living in degrading conditions. The investigations raised uncomfortable questions about how brands making some of the world’s most expensive products could have such limited visibility into factories operating close to their own manufacturing hubs in Italy.

Since then, brands caught up in the investigations have strengthened internal controls, increased factory audits and restricted subcontracting. But nearly two years on, labour groups say conditions on the ground have not fundamentally changed.

This week, BoF’s global markets editor Sarah Kent joins senior correspondent Sheena Butler-Young to examine whether luxury’s response has addressed the root causes of exploitation — or mainly created new layers of compliance around the same underlying business model.

Key Insights:

• Luxury’s supply chain problems are structural, not isolated. The 2024 investigations exposed more than a handful of bad factories. Kent says exploitative suppliers had become an “open secret” within parts of Italy’s manufacturing ecosystem, enabled by a fragmented supply chain and commercial pressure for low prices, speed and flexibility. “Everyone knows, no one tells because it is convenient to have them exist,” says Kent. “At its heart, when you really press people, they say it’s because of the price brands are willing to pay for products and the speed and flexibility at which they want them produced.”
• Brands have tightened oversight but audits are creating new pressure on suppliers. Luxury companies have increased inspections, consolidated suppliers and restricted subcontracting. But because each brand often uses a different audit system, manufacturers can face overlapping checks and conflicting requirements at a time when margins are already under pressure. “It’s a time cost, a financial cost, and a big burden to have this quite diversified system of audits that’s hitting suppliers at the moment,” Kent says. 
• Despite tighter controls, there is little evidence that conditions have meaningfully improved for workers. According to Kent, labour groups report little change on the ground, while the luxury slowdown and falling orders are adding more pressure to manufacturers.“ From what I understand from labour groups, there is not a sense that a huge amount has changed on the ground, and I think that’s partly because it’s quite a complex situation that isn’t only linked to luxury supply chains,” Kent says. Without changes to commercial practices that shape working conditions, improvements could remain limited. 
• Compliance alone cannot fix the economics that helped create the problem. For years, luxury positioned craftsmanship, quality and responsible production as part of what justified premium prices. The investigations exposed significant blind spots in that narrative, particularly where brands knew which factories were producing their goods but focused on product quality rather than labour conditions. “It is very interesting to me that for luxury in particular, which has long spoken about issues of labour abuse or environmental degradation as being a fast fashion issue, to have such apparent blind spots when it comes to its own supply chain,” Kent says.
• Industry-wide solutions remain limited by fragmented standards and voluntary participation. Efforts such as the Milan Protocol aim to create common standards and a database of vetted suppliers. But participation remains voluntary and limited geographically, while brands have struggled to align around a single auditing framework. Kent questions: “If everyone’s not on it, and everyone’s not using it, and they don’t have to be on it and they don’t have to use it, how useful is it?” 

Additional Resources:

• Has Fashion Fixed Its Italian Supply Chain Problems?
• Inside Luxury’s Italian Sweatshops Problem
• Is Luxury Finally Set for a Sustainability Reckoning?