Table of Contents

1. Key Highlights
2. Introduction
3. The Theft, the Trial and the Sentencing
4. Why Luxury Brands Destroy Unsold Goods
5. The Scale and the Paradox of No Financial Loss
6. From Shredders to Circular Hubs: Chanel’s Shift
7. Regulatory Turning Point: The EU’s Ecodesign for Sustainable Products Regulation
8. Operational Vulnerabilities Exposed by the Case
9. Market Dynamics: Secondary Markets, Resale and Gray Market Pressure
10. Environmental and Ethical Costs of Destruction
11. Legal and Compliance Implications
12. What Brands Can Do: Operational and Strategic Responses
13. Real-World Examples and Industry Responses
14. The Consumer and Reseller Perspective
15. Cultural and Ethical Considerations Inside Companies
16. How This Shifts the Balance for Luxury Strategy
17. Practical Steps for Stakeholders
18. The Road Ahead
19. FAQ

Key Highlights

• Four former Chanel Hong Kong warehouse employees were sentenced to four to seven years after attempting to steal 724 items, valued at roughly HK$19 million, that had been earmarked for destruction; all items were recovered and destroyed, leaving Chanel with no direct financial loss.
• The case shines an unflinching light on long-standing luxury-industry practices of destroying unsold goods and accelerates the push toward circular solutions such as Chanel’s L’Atelier des Matières and the Nevold hub, while regulators in the EU move to ban wholesale destruction by large companies.
• The incident exposes operational vulnerabilities in supply chains, raises reputational and environmental risks for brands, and underlines how legal, regulatory and market pressures are forcing luxury houses to change how deadstock and returns are handled.

Introduction

On a day in early 2017 that culminated in an abrupt police interception at Chanel’s Goodman Interlink logistics facility in Tsing Yi, 33 boxes on six pallets were stopped before they could be spirited away. Those boxes contained 724 items—123 wallets and 601 handbags—marked for shredding under an internal destruction process. The attempted theft failed. Hong Kong’s High Court recovered and ordered destruction of every item as planned; four former warehouse employees were later sentenced to prison terms ranging from four to seven years after being convicted or pleading guilty to conspiracy to steal.

The case has implications that stretch beyond the courtroom. It exposes long-hidden practices within the luxury industry, touches on the growing secondary market for designer goods, and coincides with both corporate shifts toward circularity and regulatory efforts to stamp out the routine destruction of unsold products. Brands face a new operating reality: tighter controls, more public scrutiny, mandated reporting and, increasingly, legal prohibitions on destroying unsold clothing, footwear and accessories.

The Chanel trial and sentencing crystallize tensions—between protecting brand exclusivity and preventing leakage into gray markets, between operational security and employee trust, and between legacy practices and the emerging obligations of sustainability law. This article reconstructs the incident, explains the business rationale behind destruction, examines how the industry is changing and outlines practical, legal and reputational lessons for brands, regulators, resellers and consumers.

The Theft, the Trial and the Sentencing

The attempted theft unfolded inside a logistics operation designed to neutralize brand risk by physically destroying merchandise that could not be commercialized—inventory designated as deadstock, returns beyond repair, or defective goods. According to the High Court in Hong Kong, four former employees conspiring to steal Chanel property moved 33 boxes from the 23rd to the 5th floor of the Goodman Interlink facility on the day of the attempted heist. The fifth floor housed the shredding operation.

Police intercepted the group as they wheeled pallets out of the building. All 724 items were recovered intact. The court later ordered that those goods be destroyed as originally planned. The catalogue of items—predominantly handbags and wallets—carried an estimated value of HK$19 million, about US$2.4 million based on the exchange cited at trial.

Two defendants entered guilty pleas before trial; the other two—the former warehouse manager and an additional warehouse worker—were convicted after full proceedings. High Court Judge Douglas Yau Tak-hong presided over the case and handed down sentences ranging from four to seven years. Prosecutors argued the theft was organized and aimed at diverting luxury goods away from official disposal channels into the gray market, where designer items can fetch a fraction of retail but still represent significant illicit profit.

The sentencing underscored that the attempted theft posed not merely a criminal affront to a private company, but an operational breach with broader ramifications: reputational risk for the luxury label, potential disruption of anti-counterfeiting efforts, and questions about the adequacy of internal controls.

Why Luxury Brands Destroy Unsold Goods

Destroying unsold or returned merchandise has been a standard practice among many luxury houses for decades. The reasons combine marketing strategy, brand protection, and inventory control:

• Protecting exclusivity: Luxury brands often guard scarcity as part of their value proposition. Excess inventory that enters discount channels can erode perceived rarity and brand equity.
• Preventing gray-market leakage: When unsold items are resold outside authorized channels—through discount outlets, unauthorized resellers or overseas brokers—brands risk lost revenue and the dilution of pricing structures in official markets.
• Avoiding counterfeiting overlap: Unsold authentic goods that enter secondary markets can make it easier for counterfeiters to mimic or blend fake items, complicating enforcement and consumer trust.
• Liability and safety: Some returned products may be defective, subject to safety recalls, or otherwise unsaleable for legitimate reasons.

The practice attracted public scrutiny in several high-profile episodes. In 2018, news that Burberry had destroyed unsold items across multiple years prompted wide criticism and a subsequent apology from the company. The controversy forced a reckoning over how luxury houses disposed of surplus inventory and whether destruction was an ethical or sustainable solution.

Chanel’s own history reflected a similar approach until more recent years. The Hong Kong trial forced the practice into the public record and compelled renewed scrutiny of how major brands handle end-of-life product decisions.

The Scale and the Paradox of No Financial Loss

The estimate put the earmarked value of the 724 pieces at roughly HK$19 million (about US$2.4 million). That figure reflects retail value, not necessarily net cost to the company, and the High Court noted that, because the goods were recovered and destroyed as planned, Chanel suffered no direct financial loss.

That outcome highlights a paradox. The criminal act targeted valuable merchandise but, by design, the company had decided earlier that those items carried no commercial future and were to be removed from circulation. The theft therefore threatened Chanel’s process integrity and brand risk mitigation rather than the bottom line in simple accounting terms. The reputational damage of such an incident—that employees were willing to divert goods slated for destruction—carries intangible costs: erosion of consumer confidence, scrutiny of internal ethics and additional oversight or compliance costs.

Moreover, the cost calculus for brands extends beyond immediate financial loss. Destruction consumes resources, energy and material value. The environmental externalities—waste generation, carbon impacts from shredding and disposal—are cumulative, especially when multiplied across global operations. The public perception of a brand paying to destroy millions of dollars’ worth of goods can inflict reputational damage that translates into long-term financial risk.

The Chanel case thus underscores that "no direct financial loss" on the ledger does not equate to absence of harm. Instead, it reframes the debate around the true cost of destroying unsold goods.

From Shredders to Circular Hubs: Chanel’s Shift

Chanel has moved to change how it handles unsaleable inventory. The company describes the destruction noted in the Hong Kong trial as not reflective of current global practices. In 2019 Chanel launched L’Atelier des Matières, an initiative to recycle unsold, deadstock and defective items from luxury and premium brands and to reintegrate materials into circular value chains.

L’Atelier des Matières operates as a recycler and processor of high-quality materials. Under Chanel’s later structure, L’Atelier des Matières was grouped into a broader circular materials hub called Nevold, which the company formally launched in 2025. Chanel invested between €50 million and €80 million in Nevold. Within this hub, L’Atelier des Matières sits alongside Filatures du Parc, a French wool spinner specializing in recycled yarns, and Authentic Material, which focuses on upcycled natural materials including leather.

The shift signals two priorities. First, Chanel aims to close material loops, recovering value that previously would have been incinerated or shredded. Second, the move anticipates a changing regulatory environment: European rules now require brands to account for and increasingly avoid destructive disposal.

Reconfiguring supply chains to capture material value necessitates operational change: collection and segregation of unsold and returned items, investment in recycling and treatment technologies, partnerships with specialized recyclers or spinners, and new quality-control regimes to ensure upcycled materials meet product standards.

Chanel’s approach reflects a broader industry trend: instead of ending a product’s life in a shredder, the product becomes raw material for another production cycle. That reduces waste while aligning with consumer expectations and regulatory requirements.

Regulatory Turning Point: The EU’s Ecodesign for Sustainable Products Regulation

Regulation is reshaping permissible corporate behavior around unsold goods. The European Union’s Ecodesign for Sustainable Products Regulation (ESPR) introduces measures that will restrict or prohibit wholesale destruction of unsold clothing, footwear and accessories by large companies. Under the framework referenced during the Chanel trial and in company statements, large firms will face a ban on destroying these categories of products; medium-sized firms will face the ban in 2030. Companies will also need to disclose the amount of stock they write off and the reasons for destruction—such as safety concerns—underlining an emphasis on transparency.

The rule set aligns environmental objectives with product lifecycle thinking. Policymakers aim to cut waste, conserve resources and incentivize reuse, refurbishment and remanufacturing. The ESPR introduces obligations that change incentives. Instead of treating destruction as an expedient solution, brands will need to show how they prevent overproduction, extend product life, and channel unsold inventory into circular streams.

For global luxury houses the EU regulation functions as a de facto standard. Given the EU’s market size and regulatory reach, many multinational brands will adopt policies across their global operations to ensure compliance. That reduces legal complexity and avoids having different disposition rules across regions.

The regulation also formalizes stakeholders’ expectations. Disclosures will provide civil society groups, investors and consumers with data to assess companies’ environmental footprints and governance practices. That transparency will likely amplify reputational consequences for brands that lag.

Operational Vulnerabilities Exposed by the Case

The Chanel Hong Kong trial revealed operational vulnerabilities that apply across retail and luxury supply chains. The theft attempt occurred within secure warehouse space where items were already segregated for destruction. Its exposure points to several weak spots:

• Access control: The involvement of current or former employees highlights the insider threat. Employee access to inventory, especially to items marked for destruction, must be tightly controlled.
• Chain of custody: Movement of goods across facility levels and into shredders requires documented chain-of-custody procedures. Each transfer should be logged, reconciled against manifests and monitored.
• Surveillance and detection: While CCTV and security measures existed, the theft attempt shows detection can happen only when real-time monitoring and rapid response are operational.
• Third-party logistics risks: Outsourced warehousing and shredding introduce additional layers of control. Contracts and oversight mechanisms should be designed to ensure compliance and transparency.
• Inventory reconciliation: Regular, independent audits of inventory slated for destruction reduce the opportunity for diversion.

Practical controls that mitigate these risks include segregation of duties, tamper-evident packaging for items in transit to shredders, real-time digital manifests, RFID tagging for high-value items, biometric access controls for destruction areas, unannounced reconciliations, and video monitoring with continuous review. Independent third-party auditors or certified destruction partners add credibility and legal defensibility.

A central lesson is that process design matters as much as policy. A brand may decide that some items are not to be watered back into commerce, but if the physical process of disposal is porous, policy is meaningless.

Market Dynamics: Secondary Markets, Resale and Gray Market Pressure

The luxury resale market has boomed over the past decade, driven by consumer appetite for authenticated secondhand goods and the economics of premium brands. Platforms specializing in pre-owned luxury—both online and brick-and-mortar—have evolved sophisticated authentication processes, fueling demand and adding liquidity to designer items.

That growth pressures brands in two directions. On one hand, resale can enhance desirability and extend product life, aligning with circular goals. On the other hand, an uncontrolled secondary market can undermine pricing strategies and erode perceived exclusivity if authentic items flood discount channels.

Gray markets—channels where authentic goods are sold outside authorized distribution—create harm distinct from the legitimate secondhand market. Gray-market goods are typically new or near-new items sold without the brand’s authorization. Brands guard against leakage that enables discounting, variable warranties, and inconsistent pricing.

The attempted theft in Hong Kong suggests that even destroyed items can have illicit aftermarket value if diverted properly. That risk incentivizes companies either to strengthen controls or to rethink the underlying strategy: if a product has residual material value, recycling or certified resale may better align with both brand protection and sustainability goals. A controlled buy-back program, certified refurbishment for resale under official channels, or partnerships with accredited resale platforms can capture value that previously vanished in shipment to shredders.

Consumer perception plays a role as well. Buyers increasingly demand transparency about product end-of-life policies. When brands destroy unsold goods at scale, buyers may see that action as wasteful. Allowing secondary-market access in a controlled way can enhance brand loyalty among consumers who prioritize sustainability.

Environmental and Ethical Costs of Destruction

Physical destruction of goods is a blunt instrument with tangible environmental downsides. Shredding, incineration and landfill disposal consume energy and release greenhouse gases. They eliminate material value that could have been recovered and reincorporated into production cycles, increasing pressure on virgin resource extraction.

Ethically, destroying goods can be seen as inconsistent with sustainability pledges. Publicized examples of large-scale destruction feed negative narratives—brands that preach sustainability yet shred products that still hold material and aesthetic value face accusations of hypocrisy. The reputational fallout can be severe in market segments where consumers prioritize environmental responsibility.

Alternatives to destruction come with operational challenges and opportunities:

• Recycling and material recovery: Textile recycling, leather reprocessing and fiber reclamation technologies can recover feedstock for new products. Chanel’s L’Atelier des Matières and Nevold are examples of this route, though scaling remains a challenge.
• Refurbishment and certified resale: Brands can recondition unsold goods and reintroduce them to market through official outlets, preserving control and capturing revenue.
• Donations with safeguards: For certain items, donation to nonprofits is possible, if done in a way that doesn’t undercut commercial channels or undermine brand positioning. Governments and NGOs sometimes coordinate redistribution programs that prevent goods from re-entering gray markets.
• Controlled destruction for safety reasons: Some items—hazardous or unsafe products—must be destroyed. Regulations often recognize this exception; the ESPR and similar frameworks typically allow for destruction when safety is an issue, provided disclosure occurs.

The decision among these options requires balancing legal obligations, financial implications and brand strategy. The pressure of new regulations and heightened public scrutiny, however, pushes the calculus firmly toward non-destructive alternatives wherever feasible.

Legal and Compliance Implications

The Hong Kong case delivered criminal sentences to individuals who attempted to divert goods. For brands, the legal scope widens beyond criminal cases of theft. Regulators are increasingly imposing requirements that affect how companies manage unsold stock.

Key compliance implications to consider:

• Mandatory disclosure: Under EU rules brands must disclose metrics about stock write-offs and the circumstances of destruction. Transparency requirements create audit trails and public accountability.
• Prohibitions on destruction: Where law prohibits destruction—subject to limited exceptions—companies must implement alternative disposition pathways and document their decisions.
• Contractual risk with third parties: Logistics providers, waste handlers and recyclers are subject to contract terms that must align with regulatory obligations. Failure by a third party can create legal exposure for the brand.
• Employment law and criminal liability: Employee involvement in misappropriation can trigger criminal law consequences, as in the Chanel case. Brands should also align internal disciplinary procedures with legal processes.
• Consumer protection and product safety: Where destruction is driven by safety concerns, brands must comply with recall and consumer safety protocols and preserve records to justify disposition.

Companies must integrate legal teams into supply chain design, not merely as post-facto reviewers. Compliance now requires proactive systems, documented decision frameworks, and rigorous record keeping.

What Brands Can Do: Operational and Strategic Responses

The Chanel case offers a road map for how brands can respond. Steps include both operational controls and strategic repositioning:

1. Strengthen physical security and inventory controls
   • Implement RFID tagging and real-time inventory reconciliation for high-value items.
   • Secure destruction areas with restricted access and biometric controls.
   • Use tamper-evident packaging and seals when transporting items to disposal points.
   • Schedule randomized audits and frequent reconciliations.
2. Outsource destruction with certified partners
   • Use certified, accredited third-party destruction services with transparent audit trails.
   • Require chain-of-custody documentation and independent verification.
3. Adopt certified circular pathways
   • Invest in or partner with facilities that can recycle, upcycle, or reintroduce materials into production.
   • Develop refurbishment programs for near-new items to be re-sold through official channels.
4. Enhance transparency and reporting
   • Publish annual metrics on unsold inventory, disposition methods and material recovery rates.
   • Provide narrative context for exceptions (safety, regulation) consistent with reporting standards.
5. Reevaluate assortment and production planning
   • Tighten forecasting and production planning to reduce overproduction risk.
   • Adopt limited-release strategies, made-to-order models or smaller production runs to preserve scarcity without mass destruction.
6. Engage stakeholders
   • Work with regulators, NGOs and industry coalitions to build viable alternatives and scale recycling infrastructure.
   • Communicate with consumers about the lifecycle of products and the brand’s approach to circularity.

These measures require investment but reduce exposure to regulatory penalties, reputational harm and the environmental impacts of destruction.

Real-World Examples and Industry Responses

Past incidents have pushed brands to change. The Burberry scandal in 2018, when reports surfaced that the company had destroyed unsold luxury goods, became a turning point. Public backlash and retail scrutiny forced Burberry to commit to alternative practices and increase transparency. Some brands now publish policies that commit to zero destruction of unsold goods in certain contexts, while others invest in take-back and recycling initiatives.

Chanel’s L’Atelier des Matières and its consolidation into Nevold represent an aggressive corporate response: a vertically integrated effort to reclaim and reprocess material inputs. Other luxury firms have pursued similar, if less centralized, strategies: partnerships with specialized recyclers, investments in textile-to-textile recycling technology, and alliances with resale platforms that maintain strict authentication standards.

Resale platforms themselves—both startups and established marketplaces—have influenced brand behavior by offering outlets for authenticated pre-owned luxury goods. When brands partner with these platforms, they retain control while enabling circular revenue capture. Some labels have also introduced certified pre-owned programs that refurbish items and reintroduce them at a lower price point under the brand’s aegis.

Regulatory shifts, particularly in the EU, accelerate these moves. They translate reputational pressure into legal obligation.

The Consumer and Reseller Perspective

Consumer expectations have shifted. A growing segment of buyers values sustainability, transparency and ethical stewardship of materials. When a luxury brand destroys goods, that action contradicts those values. Consumers may respond by shifting purchases to brands that explicitly reuse, recycle or resell product.

Resellers and the secondary market stand at an inflection point. They add value by allowing consumers access to authenticated goods that retain style and function. But gray-market operators that move new or nearly new goods without brand authorization undermine both resale marketplaces and brands themselves.

Brands can engage resellers as partners. Certified resale programs, authentication partnerships and buy-back schemes channel product into authorized secondary markets where the brand can maintain standards and capture residual value. That reduces incentive for clandestine diversion and helps maintain margins while addressing sustainability objectives.

Cultural and Ethical Considerations Inside Companies

The attempted theft also raises internal cultural issues. When warehouse workers attempt to divert goods destined for destruction, it calls into question morale, oversight and incentives. Workforce training, compensation structures and employee engagement influence behavior. If store-level or warehouse-level staff feel disconnected from corporate purpose or observe opaque processes, they may be more susceptible to illicit schemes.

Ethical leadership matters. Companies that explain why certain products must be removed—safety, regulatory obligations—while simultaneously pursuing visible recycling or resale pathways empower employees to see disposal as a responsible endpoint rather than a throwaway practice that invites misappropriation.

Transparent policy and clear consequences for misconduct deter bad actors. Equally important, involving staff in circular initiatives—where goods are repurposed or upcycled—can foster pride and oversight rather than secrecy.

How This Shifts the Balance for Luxury Strategy

The Chanel Hong Kong case is more than a criminal story. It is evidence of a broader shift in how luxury firms must manage inventory and reputation. Historically, a combination of secrecy and destruction protected exclusivity. That strategy is now insecure on three fronts:

• Legal: Regulations increasingly prohibit or constrain destruction.
• Reputational: Consumers and civil society demand responsible stewardship.
• Operational: Insider and external threats make destruction processes vulnerable and costly to secure.

Brands now face incentives to preserve material value and demonstrate accountability. The emerging optimal strategy for luxury houses is to design product and processes for longevity: fewer items destroyed, better pathways for material recovery, and systems that keep brands in control of disposition decisions while satisfying sustainability and regulatory objectives.

That is a strategic pivot: to treat unsold inventory not as a liability to be erased, but as a resource to be recovered, branded and reused.

Practical Steps for Stakeholders

For executives: Integrate circular metrics into core performance indicators. Invest in material recovery and partner with reputable recyclers. Revise contracts with logistics and destruction providers to ensure auditability.

For logistics and warehouse managers: Implement chain-of-custody documentation, strengthen access control, deploy tracking technology for high-value items, and schedule surprise reconciliations.

For compliance teams: Maintain transparent reporting and ensure alignment with evolving regulations such as the ESPR. Document exceptions with clear, auditable justification.

For investors and board members: Evaluate brands’ exposure to regulatory and reputational risk from destructive disposal practices. Push for measurable targets on deadstock recovery and public disclosure.

For consumers: Demand transparency and support brands that provide verifiable end-of-life solutions. Use certified resale channels where possible and ask questions about brand policies on deadstock, take-back and circular initiatives.

For policymakers: Support scaling of textile and leather recycling infrastructure, harmonize standards for certified destruction and material recovery, and design disclosure rules that incentivize alternatives to destruction.

The Road Ahead

The Chanel case in Hong Kong will be referenced for years as a touchstone for why luxury brands can no longer rely on secrecy in inventory disposal. The legal penalties imposed on individuals emphasize the personal liability that can arise when systems fail. The public revelations compel private firms to turn dangerous operational practices into transparent, sustainable workflows.

Nevold and L’Atelier des Matières signal a corporate recognition that material value can be reclaimed. EU regulation ensures those innovations won’t remain voluntary fringe benefits for brands that can afford them; instead, they become a required baseline for operations in large markets.

The next phase will test whether companies can scale circular solutions without sacrificing brand equity. That challenge is technical, financial and narrative: producing recycled materials that meet luxury standards; investing in infrastructure; and persuading consumers that circular products can be every bit as desirable as virgin-material counterparts.

The Chanel Hong Kong trial reconfigures incentives. Destruction of unsold goods is increasingly exposed, regulated and stigmatized. Brands that adapt—with robust controls, transparent reporting and genuine circular pathways—stand to secure both their reputational standing and long-term supply resilience.

FAQ

Q: What exactly were the employees convicted of in the Chanel Hong Kong case? A: Four former warehouse employees were found guilty of conspiring to steal property belonging to Chanel Hong Kong Ltd. The theft attempt involved 724 items—123 wallets and 601 handbags—earmarked for destruction. Two pleaded guilty before trial, while two were convicted following full proceedings. Sentences ranged from four to seven years.

Q: Did Chanel lose money as a result of the attempted theft? A: No direct financial loss was recorded. All 724 items were recovered and then destroyed as originally planned, so Chanel did not suffer an immediate financial loss on those specific goods. The broader financial and reputational impacts, however, are less tangible.

Q: Why do luxury brands destroy unsold goods? A: Brands have destroyed unsold goods to maintain scarcity, protect pricing and prevent leakage into unauthorized channels that can erode market control. Destruction has also been a method to handle defective or unsaleable items. Growing scrutiny and regulation are forcing brands to reassess these practices.

Q: What is L’Atelier des Matières and Nevold? A: L’Atelier des Matières, created by Chanel in 2019, processes and recycles unsold, deadstock and defective products from luxury and premium brands to reintegrate materials into circular value chains. Nevold is a larger circular materials hub that Chanel formally launched in 2025, consolidating L’Atelier des Matières with other entities such as Filatures du Parc and Authentic Material to scale recycled and upcycled material production.

Q: How will EU regulation affect the destruction of unsold goods? A: The EU’s Ecodesign for Sustainable Products Regulation moves to ban the destruction of unsold clothing, footwear and accessories by large companies, while medium-sized firms will be subject to similar prohibitions by 2030. The regulation also requires disclosure of stock write-offs and the reasons behind disposals, effectively incentivizing non-destructive alternatives.

Q: Are there legitimate reasons to destroy products? A: Yes. Safety concerns, legal recalls, or hazardous contamination can necessitate destruction. Regulations typically recognize these exceptions, but they require documentation and, where possible, justification that alternatives were considered.

Q: What alternatives exist to destruction? A: Options include recycling and material recovery, refurbishment and certified resale, donation (when it does not undermine commercial channels), and redesigning products for longer life or recyclability. In many cases, partnerships with specialized recyclers or certified resale platforms provide scalable alternatives.

Q: How can brands prevent internal theft or diversion of goods slated for destruction? A: Strengthen access controls, deploy inventory tracking technologies (RFID, digital manifests), enforce segregation of duties, conduct regular and surprise audits, use tamper-evident packaging, and work with accredited third-party destruction or recycling partners to provide independent verification.

Q: What does this mean for consumers and resellers? A: Consumers increasingly expect transparency and sustainability. Brands that move away from destructive practices and toward certified resale or recycling may win loyalty. Resellers benefit from formal partnerships that preserve authenticity and avoid gray-market practices. The secondary market will continue to grow, but brands will likely seek to control or partner with channels to maintain standards.

Q: Could stricter rules and public scrutiny make luxury goods more expensive? A: Potentially. Implementing circular systems, investing in recycling infrastructure and enhancing security add costs. Brands may absorb some costs to maintain market competitiveness or pass some costs to consumers. Over time, scaling and technological improvements could lower per-unit costs for recycling and refurbishment.

Q: How should investors and boards respond to risks highlighted by cases like Chanel’s? A: Assess exposure to regulatory and reputational risk from destructive disposal practices, require measurable progress on circular metrics, and push for transparent reporting. Evaluate whether management has a clear plan for material recovery, compliant disposition, and strengthened operational controls.

Q: Will destruction of goods disappear completely? A: Destruction will likely decline for categories where viable alternatives exist and regulation prohibits it. Exceptions will remain for safety or legal reasons. The pace of decline depends on technology for material recovery, regulatory enforcement, and the economic viability of circular alternatives. Brands that build robust circular systems and transparent policies will lead the transition.