A Loro Piana executive acknowledged to government officials that the luxury apparel brand doesn’t know whether some indigenous Peruvians are compensated for providing the company with the fiber used to make $9,000 sweaters.

The Italian company came under fire in March following a Bloomberg Businessweek report that showed that indigenous Peruvians supplying Loro Piana sometimes didn’t get paid for their work chasing and corralling vicuñas, a wild relative of the alpaca that produces the finest, most expensive wool in the world. Critics have called it “exploitation,” while Loro Piana says it pays local communities who then determine how they distribute payments.

The executive’s remarks were made in an April roundtable discussion between the textile industry and the government, and a video recording was obtained via a public records request. They are the most candid acknowledgment yet about potential gaps in the company’s knowledge of the labor conditions of its prized 30-year-old vicuña fiber supply chain in Peru. Loro Piana sources vicuña fiber from impoverished Andean communities that capture the animals for shearing in a process called the chaccu. 

“It’s been said that we don’t pay the people who do the chaccus,” said Eliphas Coeli, general manager of Loro Piana in Peru. He had raised his hand to take the microphone toward the end of the 150-minute meeting, which hasn’t previously been reported.

“Well, I don’t know how other companies work, but we buy the fiber and deposit the payment for the value of the fiber” to a bank account, he said. “And then the distribution of that payment is beyond our control,” he added in reference to indigenous communities and what they do with the money later. 

Loro Piana said in a statement that it had increased supplier audits to ensure compliance and is working with local NGOs to benefit as much as 15 communities involved with the vicuña with projects on infrastructure, health care, nutrition and education.  
“Loro Piana strongly reaffirms its longstanding commitment to ethical and responsible business practices,” it said. “Over the past 30 years, the maison has fully complied with Peruvian law, ethics and the labor regimes of local communities recognized by the Constitution and their legitimate practices, such as the Chaccu which takes place over one day every year.” 

The April meeting, a month after the Businessweek story was published, was attended by vicuña industry representatives and hosted by government officials.  

Loro Piana — a subsidiary of Bernard Arnault’s LVMH and a touchstone brand of the quiet luxury movement — is the world’s top buyer of raw vicuña fiber and the top seller of garments made out of vicuña wool. Peruvian indigenous groups are its top supplier of raw fiber. The company’s CEO, Damien Bertrand, told the Financial Times in October that it had “officially refuted” Businessweek’s story, without providing details. 

At the April meeting, Coeli’s remarks prompted a response from Enrique Michaud, who at the time was the government’s top official in charge of regulating wildlife, which includes vicuñas. He has since left the government. 

“I understand what you’re saying, Eliphas, and it is correct that this is a private contract signed with a community and the community takes care of redistribution” of earnings, Michaud said. “However, we must think of mechanisms to ensure that there is a correct distribution of benefits.” 

LVMH’s own code of conduct for suppliers mandates that organizations providing it with materials pay wages “sufficient to meet the workers’ basic needs and provide some discretionary income.” Loro Piana said it had “launched a supplier awareness campaign to further enforce our Code of Conduct.”

Coeli directly addressed the code of conduct in the discussion, saying Peruvian suppliers do sign it. 

“Is there some kind of indirect responsibility?,” he continued. “Yes there may be, because every company is indeed responsible for where it sources materials. But well, it’s easy to say and another thing is to corroborate.”