The fashion industry, valued at USD 1.3 trillion and employing over 300 million people worldwide, plays a significant role in global consumption patterns. With growth in global GDP, clothing production also increased dramatically while clothing utilization decreased. This system is perpetuated by fast fashion trends, leading to high waste generation, and posing severe environmental and social challenges. In fact, over 60% of textiles used end up in landfills or incineration. Also, current fashion industry still heavily relies on non-renewable resources and thus has a significant environmental footprint. In fact, greenhouse gas emissions caused by the fashion industry accounted for 4% of the global total in 2018 and thus is on a trajectory to exceed the 1.5-degree pathway.
Nevertheless, within this crisis lies an extraordinary opportunity: transitioning to a circular fashion system estimated to be worth up to USD 700 billion. To achieve this transformation, new business models and collaborative efforts across the fashion value chain are essential.
Circular Fashion: A Systemic Approach
The circular fashion vision hinges on redefining the industry's practices and creating a fashion economy where clothing and textiles maintain their highest value throughout their lifecycle. This system strives to minimize waste by reintegrating products into the economy rather than discarding them. It focuses on various key areas to realize its vision:
New Business Models: Circular fashion is introducing innovative business models that extend clothing use and offer affordable, high-quality, and personalized clothing, promoting flexibility and durability, fostering long-term customer engagement. In doing so, they create feedback loops that reinforce sustainable consumption patterns.
Capturing Full Value: Within a circular fashion economy, clothing is used more frequently, ensuring the full value of garments is realized. Recycling used clothing to create new items introduces a positive feedback loop, where recycling and reuse are reinforced, further reducing waste.
Reducing emissions from upstream operations & own operations: By adopting renewables and eliminating fossil-fuel-based inputs, upstream their supply chain and within their own operations, manufacturers contribute to decoupling production growth from emissions produced.
True Cost Reflection: Pricing in this economy reflects the complete costs of production, including environmental and societal impacts. Transparently reporting these costs and incorporating them into product prices ensures a systemic feedback loop that encourages responsible consumption.
Regeneration and Non-Pollution: Sustainable extraction of natural resources, employing regenerative and restorative methods emphasizes minimizing environmental pollution and safeguarding the health of textile workers and users, reducing negative feedback loops that perpetuate pollution and health issues.
Distributive Design: By promoting distributed and inclusive growth, the circular fashion economy nurtures a thriving ecosystem of businesses of all sizes. It circulates value throughout the system, enabling businesses and employees to participate fully in the broader economy. In this way, circular fashion creates positive feedback loops that sustain equitable economic growth.
How to transition from linear to circular business models
To embrace circular business models and promote sustainability in the fashion industry, it's vital to rethink traditional performance indicators and shift them to incentivize customers to engage in circular offerings and enhance customer experiences. Also, policymakers can further encourage this transition through tax reforms and fiscal incentives. Businesses like Vinted and FARFETCH exemplify these principles.
Second, companies should prioritize designing products with physical and emotional durability, as well as the ability to be remade and recycled at the end of their life cycles. Brands like Napapijri implement these strategies in their Circular Series. In terms of product policies, it's vital to shift the focus towards setting minimum standards based on environmental assessments to ensure long-lasting products and minimal waste.
The fashion supply chain, originally designed for one-way product flow, must evolve into a network that can circulate products both locally and globally to support circular business models effectively. Achieving this means fostering collaboration among industry stakeholders, with technology, like cloud computing, enabling multi-way partnerships. Businesses such as The Restory, which provides premium restoration services and collaborates with retailers, exemplify this approach through mutually beneficial partnerships.
Lastly, circular business models encompass a range of strategies which target three different categories: more use per user, more users per product, and beyond physical products (offering digital clothing and services). These strategies can also be combined.
Emission Reduction Potential unlocking business opportunities
Circular business models for fashion, including resale, rental, repairs, and remaking, are highlighted as a significant opportunity. These models can decouple revenue from raw material production, reducing greenhouse gas emissions, pollution, and biodiversity impacts. And as more consumers engage with circular fashion models, the positive feedback loops they create can lead to substantial reductions in emissions and a more sustainable fashion industry.
Already, they represent a USD 73 billion industry, with platforms like Depop, Rent the Runway, and The Real Real reaching billion-dollar valuations. These models have the potential to grow from 3.5% of the global fashion market to 23% by 2030, creating a USD 700 billion opportunity while significantly reducing environmental impact and promoting increased product use.
It's clear that circular fashion not only benefits the environment but also presents exciting business opportunities for those willing to embrace this system. In the end, it's a win-win solution for both the industry and our planet.
Author: Katrin Seeger, Student of MBA Sustainability Management Class 1 (2023-2025)
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