* To stop destroying stock after outcry
* Will no longer use real fur such as racoon
* Shares up 0.14 pct at 0904 GMT (Adds details, reaction)
LONDON, Sept 6 (Reuters) - Britain's Burberry will no longer burn millions of pounds worth of unsold luxury goods or use real fur in its collections following a furore over it environmental record.
It admitted in July to destroying 28.6 million pounds ($37 million) of unwanted items in a single year to prevent them being sold at below market prices and devaluing the brand.
This cast a light on waste in the fashion industry - both luxury and mass market - just a few months after the owner of Cartier and Montblanc admitted to having to buy back their own watches from dealers to prevent overstocking.
Burberry also said on Thursday it would follow the likes of Versace, Gucci and the trailblazer for ethical fashion, Stella McCartney, in removing real fur such as rabbit, fox, mink and Asiatic racoon from its ranges.
The fashion industry is under pressure from consumers and environmental organizations to make itself more sustainable and many retailers have been called out in recent years for destroying unsold stock, including by slashing or punching holes in garments before throwing them out.
In the watch market, Richemont, owner of the luxury brands, said they would buy back unsold stock from dealers and would not move them to other markets. Instead it planned to recycle the precious metals and stones that were in the high-end pieces.
Burberry, whose coats sell for more than 2,500 pounds ($3,234) and handbags retail at around 1,500 pounds, said it would expand efforts to reuse, repair, donate or recycle its products and work to develop new sustainable materials.
PETA, the campaign group for the ethical treatment of animals, welcomed Burberry's move to stop using fur, which the fashion house's chief executive said was part of bigger shift and PETA said was a sign of the times.
"Modern luxury means being socially and environmentally responsible," Marco Gobbetti, who is in the process of repositioning the label to be more upmarket, said.
In the financial year to end March, Burberry said it physically destroyed 28.6 million pounds worth of finished goods, up from 26.9 million pounds the previous year, including 10 million pounds worth of beauty products such as perfume.
Burberry said it is now working with the sustainable luxury company Elvis & Kresse to transform 120 tonnes of leather offcuts into new products over the next five years.
"This belief is core to us at Burberry and key to our long-term success. We are committed to applying the same creativity to all parts of Burberry as we do to our products."
Gobbetti is hoping new designer Riccardo Tisci, the former Givenchy star who designed costumes for Beyonce and Madonna, can transform the quintessentially British fashion house.
Campaign group Humane Society International said animal charities would unite during this year's major fashion shows to call on Italian brand Prada to follow Burberry's lead on ending the use of real fur in its collections.
"The few fashion houses refusing to modernize and listen to the overwhelming public opinion against fur are now sticking out like a sore thumb for all the wrong reasons," PETA's director of international programs, Mimi Bekhechi said.
The head of the International Fur Federation, Mark Oaten, said substituting natural fur with "plastic petroleum-based materials, like fake fur" was neither luxury nor responsible. ($1 = 0.7736 pounds) (Reporting by Kate Holton; editing by Guy Faulconbridge and Alexander Smith)