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PARIS — When Tod’s chairman Diego Della Valle bought Schiaparelli in 2007, the brand was little more than a mythical name and a tiny office on Paris’ Place Vendôme stuffed with sketches and records. The house had stopped making collections in 1954 and its licensing business, including trademark perfumes in surrealist bottles, had long since dried up.

But Della Valle saw the potential for reviving the dormant couture house, a so-called “sleeping beauty” brand which had been positioned by founder Elsa Schiaparelli at the vanguard of modern luxury. Schiaparelli’s garments melded couture craftsmanship with provocative design while carving out a place in the cultural zeitgeist through partnerships with artists like Salvador Dalí and Man Ray, as well as dressing clients like Marlene Dietrich.

In recent years, Della Valle and a team including CEO Delphine Bellini and Daniel Roseberry (the brand’s creative director since 2019) have restored the house block-by-block, at times almost literally as the brand reclaimed the leases to its historic hub on Place Vendôme one room at a time. The nerve centre of Schiaparelli since 1935 is now buzzing with activity again, home to a light-filled third-floor boutique and couture salon as well as the company’s offices, design studio and atelier.

“The strategy is to build the dream, and 21 Place Vendôme is the symbol,” Della Valle said in an exclusive interview with BoF. “We were very lucky to take back all the building where she was 70 years ago. I walk outside the Ritz after dinner and think — my God, this is a dream.”

Indeed, reanimating the Schiaparelli brand in step with efforts to reclaim its physical patrimony have set the project apart from other attepts to reawaken ‘sleeping beauties’. Where efforts to relaunch brands including Vionnet, Poiret and Patou have, at times, felt contrived, it’s increasingly easy to forget that Schiaparelli ever went away thanks to the immersive physical experiences it stages in the Vendôme space, which is replete with Surrealist flourishes like hand-drawn wallpaper and fish-shaped lounge chairs.

But rooting the project in a physical hub isn’t the only thing Della Valle did right. The house’s strategy has been to aim high, not wide: restoring its authority for design and craftsmanship by showing only haute couture collections for nearly a decade before gradually extending its offer into ready-to-wear, shoes, bags and jewellery.

“The dream is to do one of the most charming and exclusive brands in the world — very desirable, with products that are unusual but super strong — and to build an important story with the most exclusive customers,” Della Valle explained.

Awareness of the Schiaparelli name has surged to new heights since American designer Roseberry rolled out an opulent, immersive vision for reviving the brand’s codes. His eye-catching trompe-l’œil designs have been catnip to celebrity stylists, creating major social media moments.

Earlier this year, Roseberry’s choice to show plush cat heads during haute couture week was decried online as glamourising big game hunting (especially when the looks were mistaken by some viewers for actual taxidermy). But the dust-up did little to slow down the house’s expansion as it seeks to capitalise on peak visibility by selling more practical products in addition to marketing its couture fantasy.

Ready-to-Wear Push

Alongside his visually arresting made-to-measure outings, Roseberry has dug deep into the house’s archives to create a 360-degree menu of brand signatures including keyholes, measuring tapes and anatomical motifs to deploy across product lines. His ready-to-wear and accessories collections often put a bold, erotic spin on traditional, ladylike chic: imagine ultra-fine tweed jackets with buttons shaped like ears, or high-heeled shoes with bronze toenails .

After gaining attention for initial ready-to-wear capsules sold only at the brand’s Place Vendôme salon, the brand expanded the line into a full collection and opened its first US boutique inside Bergdorf Goodman in New York in 2021. The brand staged its first full-fledged ready-to-wear show in its history in February.

Since then, Schiaparelli has opened shop-in-shops at Neiman Marcus in Los Angeles and Dallas as well as a 1,600 square-foot space in London’s iconic Harrods department store. The Harrods location is on track to exceed its first-year target three-fold, the store’s buying director Simon Longland said. “The reaction from the customers has been instant. The distribution is still so small, and that rarity feeds the demand.”

“It’s utterly unique but also easy to read and understand,” Longland added. “There are all these signifiers that are an elegant and sophisticated way to have recognition without needing to use a logo.”

In a luxury market where top-spending, ultra-wealthy clients are driving growth, it may serve Schiaparelli that its ready-to-wear expansion is hardly an entry-level play. The brand’s €5,400 blazers and €4,500 bronze-embellished platform boots are positioned mid-way between standard luxury ready-to-wear and couture. Even t-shirts are priced at €750 (they’re embellished with false nipple piercings).

But even as the brand’s commercial offer begins to gain traction, such a small store network will likely struggle to bring in revenues commensurate with the cost of operating a couture house inside some of the world’s swankiest real estate. According to public filings, Schiaparelli continues to report operating losses, and has deferred payment on millions of euros in loans from its Italian parent company. The brand’s “start-up phase was extended by the pandemic,” the filings state. Schiaparelli declined to provide further information on its revenues or profit.

Forty Stores

Cue a major expansion plan: to capitalise on the current momentum, Della Valle says the brand will raise its store count to 30 or 40 locations mid-term. “We want to push it as soon as possible — but still with a prudent strategy,” Della Valle said.

In Paris, the brand is getting ready to open a new couture salon on its second storey, freeing up more space in the rest of the building for selling to walk-in customers across categories.

In addition to more locations selling Schiaparelli’s full offer, the plan also plans to start rolling out dedicated corners for accessories and shoes next year. Such a move could help broaden its audience among the crowds that swarm ground-floor handbag galleries at prestigious department stores.

An accessories pop-up currently on display at Harrods (next to the store’s busiest entrance) is an initial test to see how Schiaparelli’s bags, shoes and jewellery will fare among a wider swath of consumers.

Perfume Potential

Once the ready-to-wear and accessories networks fall into place, Della Valle says he sees huge potential in an eventual expansion into perfume and beauty — a category where Schiaparelli’s brand awareness would be a major asset, and where it has a serious archive including ultra-collectible bottle designs by Salvador Dali.

A beauty license would represent a welcome payday for Della Valle after more than a decade investing in Schiaparelli’s return. But amid the rise of luxe perfume specialists like Le Labo and Byredo, it’s unclear whether the airport- and department store-grade perfumes that are the bread-and-butter of big licensees like Coty and L’Oréal would be aligned with Schiaparelli’s couture-driven strategy. Gucci-owner Kering recently launched an internal beauty division with the ambition to take back chunks of its beauty business from licensees and gain tighter control of its image.

Della Valle declined to comment further on plans for Schiaparelli’s beauty, simply saying it would be the “final piece” of the strategy once ready-to-wear and accessories are solidified. “The key will be always to balance exclusivity and turnover — to have luxury turnover,” he said.

EU preparing to file anti-competitive charges, according to people familiar with probe

Adobe’s $20bn deal to buy Figma is facing a fresh setback as regulators in Brussels prepare to file anti-competitive charges against the companies, an escalation that signals the EU believes the acquisition will harm rivals in the digital design market.

The charges, which might come as early as this week, will flesh out the EU’s concerns that the merger could lead to less innovation and higher prices, according to two people with direct knowledge of the probe.

In June, the Financial Times reported that the deal, which was announced in September 2022, was facing a long EU antitrust investigation because of competition concerns. The European Commission, the EU’s executive arm, said the deal needed to be scrutinised in Brussels even if the companies’ sales in Europe were too low to require a probe. 

Brussels said then that scrutiny was required because the deal “threatens to significantly affect competition in the market for interactive product design and whiteboarding software”.

EU officials are increasingly worried that the merger represents what they view as a “killer acquisition”, whereby a large company acquires a smaller competitor to eliminate rivalry. 

The commission declined to comment on Tuesday. Adobe did not immediately reply to a request for comment. Figma declined to comment.

The move represents the latest legal challenge to the deal, which is already facing a long investigation in the UK, where authorities are seeking to determine whether the transaction will lead to a market with fewer products, improvement in existing ones and less competition. 

A preliminary assessment of the deal already revealed a “substantial lessening of competition” in the UK. In the US, the Department of Justice is reportedly preparing a lawsuit to block the transaction. Adobe has already indicated it is ready to deal with probes as regulators intensify their scrutiny of large tech transactions. 

The $20bn deal, which was announced in September 2022, values Figma at roughly 50 times its annual recurring revenue. The price is double the amount the maker of cloud-based design tools was valued at in a private funding round in 2021.

It also represents a tenfold jump compared with Figma’s value in 2019.

Figma and Australia-based Canva are prominent developers of cloud-based design tools. These tools are known for offering improved performance compared with Adobe’s offerings, such as Photoshop — a market leader in image editing for many years.

The U.A.E. is set to host U.N. negotiations aimed at setting rules for a global carbon market

One of the world’s biggest exporters of fossil fuels, the United Arab Emirates, is attempting to position itself as a leader in establishing global carbon markets as it prepares to host annual United Nations climate talks this month.

Those efforts are coming under scrutiny as a company owned by one of the U.A.E.’s royal families prepares to secure rights to produce carbon credits from a giant expanse of African forest.

The climate negotiations this month seek to reach agreement on rules to create a global market for trading carbon credits, where credits can be purchased to compensate for emissions that contribute to global warming. The idea is to create an incentive to reduce emissions.

But many environmentalists have become critical of some carbon-credit projects, alleging that they are overstating emissions reductions and that the purchase of credits is simply giving countries and companies cover to continue polluting—a practice some have labeled “greenwashing.”

Blue Carbon, a private company owned by Sheikh Ahmed Dalmook Al Maktoum, a member of the ruling family of Dubai, signed preliminary agreements this year with five African nations—Liberia, Tanzania, Zambia, Zimbabwe and Kenya. The deals would grant it the sole right to develop and sell carbon credits from more than 60 million acres of forest, equivalent to the entire land mass of the U.K. If completed, the deals would be among the largest of their kind aimed at global carbon markets.

Climate campaigners are warning that these types of agreements could influence how negotiations play out at this year’s U.N. climate talks and, ultimately, make the rules for global carbon markets less effective at reducing emissions. At stake is agreeing on regulations that are tough enough to build trust in the market, with credits representing genuine reductions in emissions.

Blue Carbon’s 54-page draft contract with Liberia, dated July 2023 and reviewed by The Wall Street Journal, shows how lucrative the deals could potentially be—both for the company and the African countries.

The deal with Liberia could cover 2.5 million acres of forest—10% of the nation’s land—for the next 30 years, according to the draft contract. Blue Carbon would get 70% of the proceeds once credits are sold, with 30% going to the government for the first 10 years. After that, there would be a 50-50 division. Those splits are unusually high in favor of the company, environmentalists said.

The draft contract doesn’t mention any upfront payment to Liberia to acquire the carbon rights. The company said its deals were based on “benefit sharing arrangements,” but declined to discuss specific details of its contracts. Blue Carbon said it hadn’t reached a final agreement with Liberia on income distribution. The company said that there was interest from the U.A.E. and several other large entities in the oil-rich Persian Gulf for the credits it hopes to generate.

“Blue Carbon greatly appreciates the trust these countries have placed in our initiative,” the company said.

Blue Carbon’s deal with Zimbabwe is even larger, covering 19 million acres, which is about 20% of its total land.

The concern among environmentalists is that the African forest deals could give the U.A.E. an incentive to push for more lenient rules during the U.N. climate talks, known as COP28, that allow it to generate more credits from the forests. The countries on the other end of the deal would also have an incentive to generate more money from the deals. If that leads to weaker rules for the U.N. carbon credit regulations, it could hurt the integrity of the market, they say.

“The main concern with all these deals is that it allows U.A.E. to continue emitting CO2 by buying dubious carbon credits while undermining the possibility of these African countries meeting their own reduction commitments,” said Saskia Ozinga, founder of Fern, a European forest advocacy group, referring to African nations using the credits to meet their own climate goals.

The U.A.E.’s Ministry of Climate Change and Environment declined to comment on the potential outcome of the negotiations. “The U.A.E. is also working with countries globally to accelerate clean energy transition, having invested more than $50 billion into renewable energy projects across 70 countries,” the ministry said, adding that the U.A.E. is aiming for a 19% absolute cut in its own emissions by 2030.

Liberian authorities acknowledged there are some legitimate concerns about its deal with the U.A.E. Regulators are reviewing it and working on a legal framework for the country’s carbon assets, said Wilson Tarpeh, executive director of Liberia’s Environmental Protection Agency. “Liberia is a developing country that is rich in forest and biodiversity,” he said. “There are many interests when it comes to forest and its governance.”

Zimbabwe’s environment minister, Nqobizitha Mangaliso Ndlovu, also said the country was working on a legal framework for its carbon credits that would be transparent and ensure the money raised benefits the communities in the affected areas.

National and regional carbon markets already exist, where companies trade credits to meet emission caps required by law, a market estimated at $900 billion. There is also a far smaller self-regulated “voluntary” carbon market, where companies buy credits to improve their environmental credentials, but aren’t required to do so.

Among the most pressing issues at the U.N. talks is setting up a global carbon market, under the 2015 Paris climate agreement. Countries need to decide what types of activities will qualify for carbon credits and how to quantify the benefits of those projects.

A carbon credit is generated when one metric ton of greenhouse gases is removed from the atmosphere, for instance, by growing trees or switching to renewable energy. The purchaser of a credit is then permitted one ton of emissions.

Carbon credits generated from forests are particularly difficult to verify. Forests act as sponges for absorbing carbon dioxide, but simply preserving the forest as-is wouldn’t generate carbon credits. A carbon credit project must show some improvement to the forest that increases its ability to absorb carbon dioxide, such as conservation work that makes the vegetation cover more dense.

A particularly controversial form of carbon credits is what is known as “emission avoidance,” in which credits are calculated based on what would have happened if a conservation program weren’t in place, such as logging. The category is used by many forest projects in the voluntary carbon market. Emission-avoidance credits are expected to be a subject of debate during the negotiations in the U.A.E., and the European Union and a group of Latin American countries have warned that including this category would undermine the integrity of the U.N. market.

Kate Dooley, a research fellow at the University of Melbourne’s Climate and Energy College, said that if the climate talks lead to allowing avoided emissions to qualify for credits, that would potentially make Blue Carbon’s rights to harvest credits much more valuable, but would be a setback for global climate goals. She said that the world needs a giant absolute reduction in emissions by 2050, not a net reduction achieved by using methods like carbon credits.

“There’s only a small opportunity for this kind of forest offsetting to have any role in climate mitigation, so it is being overused and over relied on by many countries,” said Dooley.

Blue Carbon will decrease carbon emissions by promoting “sustainable forest management, conserving forests and increasing forest carbon stocks,” according to the draft contract with Liberia.

“We are anticipating credits to be generated from deforestation that has been averted, forest regeneration and restoration, conservation,” said Tarpeh, the executive director at Liberia’s EPA.

Proponents say the credits would help direct money toward developing countries where it can achieve greater cuts in emissions than the same amount would in more advanced economies. “This promotes sustainable development and the international cooperation required to solve the climate crisis,” said Andrea Bonzanni, international policy director at the International Emissions Trading Association, a trade body.

Some carbon-credit projects have also been criticized for failing to direct enough money to the communities that live in the areas where the credits are generated. There are tens of thousands of people living in, and surviving off, Liberia’s forests.

Andrew Zeleman, head of the secretariat of the National Union of Community Forestry Development Committees, a nongovernmental organization in Liberia, said that forest dwellers there haven’t been consulted on the deal being negotiated with Blue Carbon. He said that under other types of commercial agreements involving forests, the community gets up to 55% of revenues, under Liberian law. But there is no local law governing carbon credits, he said.

“We are a sovereign nation. Any agreement we sign with a company must be in accordance with our laws,” said Zeleman.

Tarpeh, the executive director of Liberia’s EPA, said that he expected consent of the local population to be obtained and the deal to be completed before COP28.

Methane emissions reduction is oil and gas sector’s ‘Mission Invisible’

Energy Source took a road trip from Houston, Texas, to Louisiana’s Lake Charles last week to take a look at some of the liquefied natural gas plants that have propelled the US to become the world’s largest exporter of the fuel.

The LNG trade has become a multibillion-dollar industry and helped Europe wean itself off Russian gas, but it has come at an environmental cost — evident from the flaring of methane at facilities along the Gulf coast.

Unlike other pollutants emitted by oil and gas facilities, such as sulphur dioxide, methane is odourless and colourless. The potent greenhouse gas, however, is responsible for almost a third of the emissions-induced increase in global temperatures since the start of the industrial era, according to a report by Wood Mackenzie.

The report titled Mission Invisible: tackling the oil and gas industry’s methane challenge, which is due to be published this week, should provide a wake-up call to the global oil and gas industry. The consultancy says the sector is responsible for a quarter of human-caused methane emissions.

US-based companies will soon face tough rules and penalties for emissions from large-scale flaring and venting events, as well as losses from innumerable small, undetected or unreported leaks.

President Joe Biden’s Inflation Reduction Act will introduce a charge of $900 per tonne of methane emitted in 2024, rising to $1,500 per tonne in 2026. The EU is also working on laws to prevent intentional methane losses.

Methane is a primary component of natural gas and is produced by virtually every oil and gas project worldwide. When it is not cost effective to capture it, companies release it into the atmosphere via venting or burn it through flaring, which converts it into carbon dioxide.

Methane is more than 28 times as potent as CO₂ at trapping heat in the atmosphere, according to the US Environmental Protection Agency, which has proposed halting almost all flaring and venting by companies.

“Methane emissions are a huge threat to climate change and methane is a lot more powerful than CO₂,” said Elena Belletti, co-author of the Wood Mackenzie report, which warns regulation is getting serious for the first time.

The measurement conundrum

COP28 will be pivotal to global efforts to crackdown on methane emissions, as governments properly assess abatement efforts for the first time since the Paris agreement, Belletti said. This will highlight a significant shortfall in progress, according to Wood Mackenzie.

But governments and industry face a big challenge when it comes to measurement because existing technology was unable to provide complete coverage or granularity on emissions, the report will say.

While large-scale release can be picked up by satellite technology, aircraft, drones, regional sensors and optical gas imaging cameras, there is not yet a widespread network of such equipment due to the high cost of installation. Smaller leaks, which are typically caused by faulty or loose valves and venting from tanks and wellheads, are extremely difficult to detect and measure with current technologies.

Methane is also highly dispersible: a methane molecule can travel from North America to South Asia in less than two weeks, adding to the measurement challenge.  

The complexity of measuring emissions suggests methane losses are far larger than current estimates. A 2022 study by The Royal Society of Chemistry estimated actual methane emissions from the UK oil and gas sector could be five times current estimates.

Looking forward

Wood Mackenzie says better measurement technologies are coming. Next year, the Environmental Defense Fund, a US nonprofit group, plans to launch MethaneSAT — a satellite that can provide high-resolution coverage of methane emissions from at least 80 per cent of global oil and gas facilities.

But the consultancy recommends that industry should not wait, and called on all oil and gas producers to “turbocharge abatement” of methane, noting it is one of the most achievable ways for companies to make a sizeable dent in their greenhouse gas emissions.

Reducing venting and flaring is a pressing task that does not require technological improvements, and capturing this methane and channelling it into sales can generate revenue and offset abatement costs. Governments should also step up to the plate by properly enforcing new regulations, collaborating with industry on targets and support funding for new measurement and abatement technology, according to the authors.

Aurelius buys ethical beauty retailer from Brazilian cosmetics group

Brazilian cosmetics company Natura has agreed to sell The Body Shop to private equity firm Aurelius, after struggling to revive the UK retailer’s fortunes.

The deal gives the company an enterprise value of £207mn, Natura said in a statement, a fraction of the €1bn that Natura paid to acquire the business from L’Oréal in 2017.

For $3.9bn-valued Natura, the divestment represents another step in a retreat from its once global ambitions. The São Paulo-based group went on an international expansion drive in the previous decade, buying up The Body Shop and then door-to-door seller Avon Products for $2bn in 2019.

Founded in 1976 by the late Anita Roddick and her husband Gordon, The Body Shop was among the first companies to promote so-called ethical consumerism which argued that business could be a force for good.

The Body Shop now has about 2,500 shops across more than 70 countries and sells a range of skincare, body care and hair care products, among other things, which have not been tested on animals and are increasingly vegan.

Aurelius, which has offices across Europe, specialises in buying and turning around unloved businesses carved out of corporates or companies facing operational difficulties.

“The Body Shop is a business many of us grew up with,” Tristan Nagler, a partner at Aurelius, told the Financial Times in an interview. “There is an opportunity to put it on its own two feet and return it to its former glory.”

Aurelius is betting that it can improve the performance of a business that has struggled under Natura’s ownership and had to contend with other companies catching up with its once-unique ethical messaging.

After a couple of years of improved performance, The Body Shop’s financial figures once again disappointed investors and analysts in 2022.

The retailer’s declining sales continued in the third quarter, falling 13 per cent in constant currency terms to R$830mn. Core profits took a hit from restructuring costs, with earnings before interest, tax, depreciation and amortisation down two-fifths to R$62m.

Nagler said Aurelius sees an opportunity to build out The Body Shop’s online presence, an area where the beauty market has not been as quick as other industries to generate sales.

“It’s still quite bricks and mortar,” Nagler added, referring to the beauty market more broadly. “The whole industry is lagging a little bit and there is no great reason for that.”

Aurelius has sealed deals in consumer-facing retailers including buying sportswear retailer Footasylum from JD Sports last year.

“We are judging every situation on its merits and try to be open-minded,” Nagler said. Despite rising competition, he said, “the beauty market is incredibly attractive and growing strongly”.

Natura’s ownership of The Body Shop and Avon turned it into the world’s fourth-largest pure-play beauty company. But the cosmetic conglomerate’s attempts to revive the fading marques faltered.

A chief executive appointed last year, former banker Fabio Barbosa, has embarked on a corporate turnaround effort, selling off business units as management looks to tackle its debt levels.

Natura said under its ownership The Body Shop had “undergone an overhaul of its product portfolio and a rejuvenation of the brand”.

“We are pleased to have found a strong home for The Body Shop to write the next chapter in its remarkable story,” added Barbosa.

Natura offloaded luxury Australian beauty outfit Aesop to industry rival L’Oréal earlier this year on an enterprise value of $2.5bn.

It is now focusing on integrating its eponymous brand, famed for sourcing sustainable ingredients for soaps and shampoos from the Amazon rainforest, with the Latin American operations of Avon.

While Natura’s share price has rallied about 30 per cent so far this year, the shares are down sharply from a peak in July 2021.

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