The New Era of Luxury: Navigating the change with Positive Luxury's ESG Policy Guide

The luxury sector is embracing a new era of responsibility. The latest ESG Policy Guide from Positive Luxury in collaboration with Baker McKenzie, offers timely insights into the key areas luxury brands need to address to stay ahead in this changing landscape. Let's explore some of the big takeaways and how these shifts will impact the future of luxury.

Transparency Is Now Non-Negotiable

Transparency is quickly becoming essential in the luxury world as brands are being asked to get real about their supply chains. The EU’s Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) highlight the need for full disclosure throughout a product’s lifecycle, from raw materials to finished goods. For luxury brands, this means having a clear line of sight into every detail starting with where materials come from, to who produces them, and how they impact the environment. This push for transparency offers more than compliance; it’s an opportunity for luxury brands to build trust with consumers and important stakeholders.

Embracing Circularity and Innovation

Circularity is a huge opportunity for luxury brands to rethink their approach. New regulations like the EU’s Green Deal and Ecodesign for Sustainable Products drive this shift. This means luxury products are increasingly being created with their full lifecycle in mind, from durable materials to repairable designs. The end goal? A product that consumers can cherish for life, rather than a fleeting trend. But moving towards circularity presents a creative challenge: designing products that last while maintaining the prestige and exclusivity customers expect. As consumers seek products that are built to last, this focus on circularity reinforces the luxury sector’s traditional values of quality and craftsmanship in a way that aligns with modern sustainability goals.

Making Claims with Confidence

Gone are the days when a simple “eco-friendly” label sufficed. With the EU’s Green Claims Directive, brands now have to back up their environmental claims with data and certification. This is a chance for luxury brands to make sure their sustainability promises are meaningful, clear, and verifiable. By avoiding generic claims and using data-driven certifications, brands build credibility and connect with today’s informed consumers.

Prioritising Social Responsibility in the Supply Chain

The “social” pillar of ESG is especially significant for the luxury sector, which often relies on global supply chains. The EU’s Forced Labour Regulation sets a new standard for ethical practices, requiring brands to monitor their supply chains closely to prevent human rights abuses. Compliance with these standards involves conducting due diligence on labor practices, engaging with suppliers, and regularly auditing working conditions. Championing fair labor practices and human rights is an opportunity to make a real difference.

Governance and Reporting: Essential Components of ESG Leadership

Governance is a vital component of ESG, as it ensures companies are accountable and transparent about their impact. The EU, UK, and US are all enforcing stricter reporting regulations that require brands to disclose their environmental risks, emissions, and governance structures. The SEC’s new rules on climate-related disclosures, along with California’s upcoming emissions reporting regulations, are just two examples of this trend. For luxury brands, meeting these governance standards shows a commitment to transparency and resilience, aligning with investor and consumer expectations.

Tackling Biodiversity and Waste Management

The EU’s Biodiversity Strategy and the Deforestation-Free Supply Chains Regulation target biodiversity preservation and responsible sourcing, crucial for luxury brands that use materials like leather, wood, or exotic textiles. These regulations aim to curb the environmental impact of sourcing practices and ensure that materials are harvested sustainably.

Waste management is another area under the spotlight. The UK’s Plastic Packaging Tax and similar measures in the US are pushing brands to reduce single-use plastics and rethink packaging solutions. By considering sustainable packaging options like recycled or biodegradable materials, brands reflect a commitment to environmental stewardship.

The Road Ahead: Blending Prestige with Purpose

The luxury sector’s path forward is clear—embracing transparency, innovation, and accountability in every aspect of business. The brands that can successfully blend prestige with purpose will set a powerful example, proving that luxury and sustainability are not just compatible but essential to each other. At doESGood, we’re excited to see how these changes unfold and to continue exploring how industries like luxury can make a real impact.

What do you think? How can luxury brands go beyond compliance to become true leaders in sustainability? Share your thoughts in the comments!

READ THE LUXURY ESG POLICY GUIDE