The Path Less Traveled
The path that we are on, following the linear model, is leading us straight towards ecological ruin. But there is another path to take, one that is both more sustainable and more profitable. Enter the circular economy. This innovative approach reimagines the traditional “take-make-dispose” model, instead promoting the concept of a closed-loop system in which waste is minimized and resources are kept in use for as long as possible. By embracing the circular economy, brands can lend a hand in creating a world in which they no longer produce waste but instead produce value.

The circular economy is all about maximizing the use of existing materials and products and emphasizing the importance of reducing waste and minimizing the use of resources. One way to achieve this is through the adoption of alternative circular business models that can decouple revenue streams from production and resource use. There are four main business models that are gaining popularity in the economy: resale, rental, repair, and remaking.[4]

Going Around in Circularity Going Around in Circularity

Resale involves the peer-to-peer sale of second-hand items or the use of third-party marketplaces for re-commerce and take-back initiatives. Rental models allow for one-off peer-to-peer rentals as well as large-scale rental and subscription models by multi-brand platforms or individual brands. Repair involves returning faulty or broken products or components to a usable state, while remaking involves creating new products from existing ones through disassembling, re-dyeing, and repurposing. These models offer businesses and individuals the opportunity to reduce waste, save resources, and build a more sustainable future.

Circular business models are a win-win for both the environment and companies. In Europe, transitioning to a circular economy could reduce carbon dioxide emissions by 50% by 2030,[5] while businesses can generate revenue without the need to produce new items from scratch. This shift to circular activities could bring in an estimated USD 700 billion by 2030, which is equivalent to 23% of the global fashion market.[6] Additionally, by making more efficient use of resources, companies can lower their production costs.

The fashion industry needs to reduce emissions by 50% or 1.1 billion tons by 2030 to contribute to limiting global heating to 1.5 degrees, as set out by the Intergovernmental Panel on Climate Change (IPCC) and ratified in the 2015 Paris agreement.[7] Resale, rental, repair, and remaking could significantly contribute to reducing the industry’s emissions, with a potential overall reduction of up to 16% if these models reach a 23% market share by 2030.[8] Achieving more uses with fewer products can also help reduce the negative impacts on biodiversity associated with virgin fiber production and disposal. By doing so, it could increase product utilization from 25 uses per item to 45 uses per item on average.

The Proof Is in Serving the Pudding
To fully embrace the circular economy, brands need to rethink their operating models, including performance indicators (KPIs), customer incentives, and experiences.[9] Setting targets to stop using virgin resources and tracking revenue and production ratios demonstrates a commitment to environmental goals and meets customer requirements. Additionally, incentivizing customer engagement in circular models through loyalty programs and offering certain products exclusively through circular models is crucial. To ensure the success of the circular business model, companies must also invest in convenient user experiences, establish lifestyle community platforms, and design marketing campaigns that make circular models as easy and common as traditional linear ones.

To further involve consumers in the circular economy, brands can provide repair, mending, and washing services, as well as offer “do-it-at-home” tips and inspire customers to make fashion last longer. By doing so, customers develop a stronger attachment to their clothes, which leads to brand loyalty.

The Path Less Traveled
The path that we are on, following the linear model, is leading us straight towards ecological ruin. But there is another path to take, one that is both more sustainable and more profitable. Enter the circular economy. This innovative approach reimagines the traditional “take-make-dispose” model, instead promoting the concept of a closed-loop system in which waste is minimized and resources are kept in use for as long as possible. By embracing the circular economy, brands can lend a hand in creating a world in which they no longer produce waste but instead produce value.

The circular economy is all about maximizing the use of existing materials and products and emphasizing the importance of reducing waste and minimizing the use of resources. One way to achieve this is through the adoption of alternative circular business models that can decouple revenue streams from production and resource use. There are four main business models that are gaining popularity in the economy: resale, rental, repair, and remaking.[4]

Going Around in Circularity
Resale involves the peer-to-peer sale of second-hand items or the use of third-party marketplaces for re-commerce and take-back initiatives. Rental models allow for one-off peer-to-peer rentals as well as large-scale rental and subscription models by multi-brand platforms or individual brands. Repair involves returning faulty or broken products or components to a usable state, while remaking involves creating new products from existing ones through disassembling, re-dyeing, and repurposing. These models offer businesses and individuals the opportunity to reduce waste, save resources, and build a more sustainable future.

Circular business models are a win-win for both the environment and companies. In Europe, transitioning to a circular economy could reduce carbon dioxide emissions by 50% by 2030,[5] while businesses can generate revenue without the need to produce new items from scratch. This shift to circular activities could bring in an estimated USD 700 billion by 2030, which is equivalent to 23% of the global fashion market.[6] Additionally, by making more efficient use of resources, companies can lower their production costs.

The fashion industry needs to reduce emissions by 50% or 1.1 billion tons by 2030 to contribute to limiting global heating to 1.5 degrees, as set out by the Intergovernmental Panel on Climate Change (IPCC) and ratified in the 2015 Paris agreement.[7] Resale, rental, repair, and remaking could significantly contribute to reducing the industry’s emissions, with a potential overall reduction of up to 16% if these models reach a 23% market share by 2030.[8] Achieving more uses with fewer products can also help reduce the negative impacts on biodiversity associated with virgin fiber production and disposal. By doing so, it could increase product utilization from 25 uses per item to 45 uses per item on average.

The Proof Is in Serving the Pudding
To fully embrace the circular economy, brands need to rethink their operating models, including performance indicators (KPIs), customer incentives, and experiences.[9] Setting targets to stop using virgin resources and tracking revenue and production ratios demonstrates a commitment to environmental goals and meets customer requirements. Additionally, incentivizing customer engagement in circular models through loyalty programs and offering certain products exclusively through circular models is crucial. To ensure the success of the circular business model, companies must also invest in convenient user experiences, establish lifestyle community platforms, and design marketing campaigns that make circular models as easy and common as traditional linear ones.

To further involve consumers in the circular economy, brands can provide repair, mending, and washing services, as well as offer “do-it-at-home” tips and inspire customers to make fashion last longer. By doing so, customers develop a stronger attachment to their clothes, which leads to brand loyalty.

Chain Reaction: Rethreading the Fashion Supply Line
To reach the full potential that circular business models can offer, supply chains would require a complete overhaul. A transformation of the fashion supply chain would need to consider a mutually beneficial network that can circulate products both locally and globally. It won’t be simple. A transformation of this scale requires the involvement of all players in the industry, from manufacturers to retailers, end-users, collectors, and policymakers. The role of governments is particularly crucial in fostering public-private collaboration to remove barriers for businesses and offer localized, diversified, and distributed services such as repair, reuse, and remaking.[15] To facilitate an inclusive transition to the circular economy, governments can also provide investments to develop the infrastructures required for this transition and bridge innovation gaps through research.

Several businesses have already started to put this approach into practice. The Restory, for example, offers high-end shoe and handbag restoration services and is expanding through partnerships with retailers, enabling brands to offer after-care services to customers.[16] Everybody.World is another company that is bridging the gap between customers, suppliers, and brands by co-creating designs, such as their unisex “untitled” shoes, which are based on crowdsourced designs, made locally, and come with a lifetime repair policy.[17]

Technology is also a determining factor in the transformation. It can play a significant role in enabling circularity in the fashion industry. Leveraging technologies such as AI and blockchain[18] can improve transparency and facilitate multi-way collaborations, tracking, and traceability, leaving behind traditional one-directional transactions.[19] Cloud computing has also opened up new avenues for collaborative local and global work, enabling factories and fashion businesses to work together at the same time, access relevant data, and communicate in a more efficient way.

Several businesses are ahead of the game, innovating and investing their way into the future. EON, a New York-based start-up, has launched a circular ID that provides each new fashion item with a digital “birth certificate” containing details such as its origin, creation date, and materials.[20] This information is connected to a virtual duplicate of the actual item, called a “digital twin,” and a digital passport that monitors the product’s lifecycle. This digital identification aids in the rental, resale, and recycling of clothing and accessories.

Hirestreet, a rental platform, has partnered with reverse logistics provider Advanced Clothing Solutions (ACS) to manage its warehousing. They have also developed their own white-label technology solution for rentals, called Zoa.[21] This technology allows fashion brands to offer rental options alongside traditional purchasing, with Zoa handling the rental technology, cleaning, logistics, and customer service aspects. Brands can even integrate their warehousing service with ACS.

Business of Fashion and McKinsey’s State of Fashion Report 2022[22] found 43% of Gen-Z say they actively seek out companies that have a solid sustainability reputation. The sentiment doesn’t just end with Gen-Z.[23] According to a 2022 Nosto and Censuswide survey of North American and British consumers,[24] more than half of the respondents want the fashion industry to become more sustainable, and 58% of today’s consumers actually try to keep clothes for longer to help the environment, though 1 in 2 respondents believe they aren’t built to last. And the sentiment is gaining traction year after year.[25] This data is showing that there are huge opportunities waiting for fashion brands.

The fashion industry will need to undergo a paradigm shift from its traditional linear model to a more sustainable, circular economy. What could brands achieve from this shift? They can achieve sustainability goals and maximize economic and environmental outcomes. The environment needs it. The consumer demands it. That means brands have to adapt it. As consumers seek out more sustainable options, as mentioned earlier, economic gains are waiting to be taken. It’s a win-win-win situation. The question is, when are you going to be ready to embark on this journey?

If so, join us on our webinar where we’ll be diving deeper into this topic. Subscribe to our webinar here! We look forward to seeing you there!

References

[1] “The trends and trailblazers creating a circular economy for fashion.” Available at: https://ellenmacarthurfoundation.org/articles/the-trends-and-trailblazers-creating-a-circular-economy-for-fashion

[2] “Can Fabric Waste Become Fashion’s Resource?” Available at: https://hbswk.hbs.edu/item/can-fabric-waste-become-fashions-resource

[3] “The impact of textile production and waste on the environment.” Available at: https://www.europarl.europa.eu/news/en/headlines/society/20201208STO93327/the-impact-of-textile-production-and-waste-on-the-environment-infographic#:~:text=Textile%20production%20is%20estimated%20to,into%20the%20ocean%20a%20year.

[4] “Rethink performance indicators, customer incentives, and customer experiences.” Available at: https://ellenmacarthurfoundation.org/articles/rethinking-performance-indicators-customer-incentives-and-experiences

[5] “Opportunities for innovation, growth and resilience.” Available at: https://ellenmacarthurfoundation.org/regions/europe

[6] “Circular business models in the fashion industry – new study identifies USD 700 billion opportunity.” Available at: https://ellenmacarthurfoundation.org/news/circular-business-models-in-the-fashion-industry

[7] “Fashion on Climate.” Available at: https://www.mckinsey.com/industries/retail/our-insights/fashion-on-climate

[8] “Circular Business Models: Redefining growth for a thriving fashion industry.” Available at:  https://emf.thirdlight.com/file/24/Om5sTEKOmm-fEeVOm7xNOmq6S2k/Circular%20business%20models.pdf

[9] “Fashion and the circular economy. Deep dive.” Available at: https://ellenmacarthurfoundation.org/fashion-and-the-circular-economy-deep-dive

[10] “On a mission to empower luxury shoppers to think, act and choose better: FARFETCH.” Available at: https://ellenmacarthurfoundation.org/circular-examples/farfetch

[11] ThredUP website. Available at: https://www.thredup.com/about

[12] “Life Cycle Assessment of a GORE branded waterproof, windproof and breathable jacket. Summary Report.” Available at: https://www.gore-tex.com/sites/default/files/assets/Gore_LCA_summary_report.pdf

[13] Beyond Retro website. Available at: https://www.beyondretro.com/pages/our-sustainable-vision

[14] “This Zero-Waste Brand Wants to Reward You for Your Old Clothes.” Available at: https://www.vogue.com/article/for-days-closet-credit-system-closed-loop-commerce

[15] “Co-create supply networks.” Available at: https://ellenmacarthurfoundation.org/articles/co-creating-supply-networks

[16] The Restory website. Available at: https://www.the-restory.com/services-list/

[17] Everybody.World website. Available at: https://everybody.world/pages/about

[18] “Why Fashion Supply Chain Traceability Is A Tech Challenge That Begins With AI.” Available at: https://www.forbes.com/sites/forbestechcouncil/2022/03/18/why-fashion-supply-chain-traceability-is-a-tech-challenge-that-begins-with-ai/?sh=28bfb20b5f6d

[19] “Traceability Can Enable Circularity In The Fashion Industry.” Available at: https://www.forbes.com/sites/forbesbusinesscouncil/2022/09/19/traceability-can-enable-circularity-in-the-fashion-industry/?sh=606492d711a5

[20] “New York start-up Eon making digital passports for clothes.” Available at: https://ff.textiletoday.com.bd/new-york-start-eon-making-digital-passports-clothes/

[21] “Rental tech platform Zoa launches circular rental lab for fashion brands.” Available at: https://www.just-style.com/news/rental-tech-platform-zoa-launches-circular-rental-lab-for-fashion-brands/

[22] “The State of Fashion 2022.” Available at: https://www.mckinsey.com/~/media/mckinsey/industries/retail/our%20insights/state%20of%20fashion/2022/the-state-of-fashion-2022.pdf

[23] “Consumers Demand Sustainable Products And Shopping Formats.” Available at: https://www.forbes.com/sites/gregpetro/2022/03/11/consumers-demand-sustainable-products-and-shopping-formats/?sh=5213a5496a06

[24] “Can the Fashion Industry Sustain its Sustainability.” Available at: https://pages.nosto.com/rs/339-ZHG-780/images/Nosto%20%7C%20Consumer%20report%20%7C%20Can%20the%20fashion%20industry%20sustain%20its%20sustainability%3F.pdf

[25] “Customers care more about sustainability post-lockdowns. Now what?” Available at: https://www.voguebusiness.com/sustainability/customers-care-more-about-sustainability-post-lockdowns-now-what