NEW YORK/LONDON: Luxury brands can no longer afford to ignore issues around sustainability, as a new report highlights the changing legal, social and business landscape in which they operate.

The study from the Luxury Institute and Positive Luxury, based on desk research and interviews with opinion leaders and leading executives from luxury brands and NGOs, noted that a major development has been a shift in the focus of the investment community which is increasingly looking for sustainable business models as it views company performance in a more rounded way than previously.

That is feeding through to boardrooms and down to individual brands, not just in the way they are produced but in how they get that message across to consumers.

Diana Verde Nietro, co-founder and chief executive of Positive Luxury, observed that millennials aligned with the sustainability concept more than any other, using their spending power to buy into companies which have a positive impact on society and the environment.

"In fact they are twice as likely to buy from brands with strong management of environmental and social issues," she said.

Climate change and finite resources are just two of the major challenges facing all brands, but perhaps especially luxury brands which might be viewed as privileging a few at the expense of the many.

According to Verde Nieto, "We're out of gold basically – almost all the gold we use is recycled – various substances and ingredients in skin care are threatening the environment, diamonds are scarce, and exotic skins are in trouble…basically – and this is the big 'a-ha' – some of the raw materials, crucial to the luxury industry, are under threat".

The legal landscape is changing too. Last year, for example, saw the passing of the Modern Slavery Act in the UK, requiring companies to publish an annual slavery and human trafficking statement.

Integrating sustainability into business models is moving from a "good thing to do" to a legal obligation, the report noted.

Luxury brands are starting to undertake a range of activities in response, from carrying out product life cycle analyses to reviewing packaging.

But, the study concludes, "more work needs to be done to help luxury companies realise that sustainability and profits go hand in hand, and they can reap the rewards by communicating their positive impact".

Data sourced from Positive Luxury, Harvard Business Review; additional content by Warc staff