Circular economic models in the fashion industry

November 14, 2022

The concept of a circular economy has existed for decades, but it was popularized in the early 2000s by the British economist Kate Raworth. The idea is simple: instead of the traditional linear economy, in which we take resources from the earth, use them to make products, and then dispose of them when they break or go out of style, a circular economy keeps the Earth's resources in use for as long as possible. This is often done by designing products that can be easily repaired or recycled, and by using renewable energy to power the manufacturing process. The circular economy is sometimes also called the closed-loop economy, because it keeps materials in use instead of allowing them to become waste.

The fashion industry is one of the most resource-intensive industries in the world. Not only in terms of energy and water consumption, but also in terms of end-use: the average piece of clothing is only worn a few times before it is discarded. The circular economy offers a potential solution to these problems. It is an economic model of production and consumption involving sharing, leasing, reusing, repairing, refurbishing, and recycling existing materials and products for as long as possible. Although historically applied to sectors like food and water, in recent years, it is starting to gain traction in the fashion industry as well.

There are a few key reasons for this.  First, the fashion industry is one of the most polluting industries in the world. It's estimated that fashion produces 10% of all humanity's carbon emissions, and 20% of its wastewater. Second, the industry is extremely wasteful: it's estimated that somewhere between 50% and 85% of all textiles end up in landfill each year.  Finally, there is a growing consumer awareness of the environmental and social impacts of the fashion industry. We discuss these points in detail in this briefing paper.

Circular business models in the fashion industry

To combat these trends, the fashion industry has begun to experiment with circular business models, such as those discussed below. These new business models are based on the principles of the circular economy and aim to extend the life of products, reduce waste, and minimize environmental impact.

First, through product-as-a-service (PaaS) models, in which a company sells the use of a product, rather than the ownership of the product itself. The customer pays for the service that the product provides, rather than the product itself. PaaS has the potential to change the way we think about consumption and ownership. It encourages customers to use products for as long as possible, rather than discarding them when they are no longer needed. In the fashion industry, companies like Le Tote and Rent the Runway are using PaaS to provide customers with access to a wide variety of clothing and accessories, without the need to own them.

Another way to extend the life of products and reduce waste is through take-back and repair programs, which offer customers the opportunity to return used products so that they can be repaired or reused.  In the fashion industry, a number of companies, including Patagonia, Eileen Fisher, and REI, have established take-back and repair programs for their clothes. Customers can return used or damaged items to the store, and the company will either repair the item or find someone who can use it. These programs keep clothes out of landfills and help to prolong their use. 

In addition, material-sharing platforms connect businesses and individuals who have excess materials with those who need them. These platforms allow businesses to sell or trade their unused materials, rather than disposing of them as waste.  In the fashion industry, a number of material-sharing platforms, including Material Exchange and FabricLink, have been established. These platforms connect fashion businesses with each other so that they can sell or trade their unused materials, helping to reduce waste and keep valuable resources in circulation.

Associations such as Emmaüs have set up second-hand shops, which collect and sell clothes that have been donated. These shops provide affordable clothing to those in need, while also keeping clothes out of landfills. Emmaüs also offers training and employment opportunities to the people they help, including in second-hand boutiques such as Emmaüs Solidarité.

Additionally, an extensive network of donation centers and street containers have been set up throughout Europe and the United States. Rather than throwing out their clothes, consumers can enter their zip code to find the drop-off point closer to their place. Associations and companies in the recycling sector collect the donated garments, sort them by hand, and resell them to second-hand stores or send them to textile recycling companies. Clothes that can no longer be worn (approximately 50%) are cut, shredded, frayed, or crushed and transformed into rags, insulating articles, new clothing, or secondary raw materials.

International policy on circular economy initiatives in textile

The circular economy is also being promoted by a number of governments and international organizations. In Europe, the European Commission has published a number of studies related to the circular economy, including its Circular Economy Action Plan in connection with the March 2020 Green Deal. The Commission has also established the European Circular Economy Stakeholder Platform, which is a forum for dialogue and exchange of information on the circular economy.

The United Nations Economic Commission for Europe (UNECE) has also been working on circular economy initiatives, including the development of an international policy guide on the circular economy for the textile and clothing sector. Moreover, the United Nations Industrial Development Organization (UNIDO) is also working on the promotion of the circular economy, and has published a number of resources, including a report on The Business Case for the Circular Economy in Developing Countries.

In 2020, Japan created a task force on fashion and the environment to promote "sustainable fashion," especially in reducing discarded clothing. The new task force plans to conduct surveys on how companies collect used clothing and consumer awareness of clothing collection to facilitate reuse and recycling. The surveys will target municipalities, apparel companies, and consumers, encouraging consumers to donate and recycle clothing items that have become unnecessary.

Meanwhile, China, as producer of half the world's textile fiber, issued a guideline in April 2022 that aims to significantly increase its capability to recycle textile waste, most of which is non-biodegradable. The country aims to recycle a quarter of its textile waste and use it to produce 2 million metric tons of recycled fiber annually by 2025. It also plans to introduce preferential policies to incentivize companies to improve product design so that they can easily dismantle, classify, and recycle items.

In India, a reuse tradition is long in place, consisting of younger siblings wearing the clothes worn by elders, with babies also being clothed in used garments. The Indian government has also put in place recycling programs to use imported second-hand clothes as raw materials for manufacturing new items. In Bangladesh, a formal second-hand clothes market has existed for decades, in which used clothing is resold, often after being mended or altered.

In Africa, the Rwandan Government has implemented a three-year gradual process to phase out the importation of second-hand clothing and footwear to promote the country’s textile, apparel, and leather industries. In Zambia, the government has also put a number of measures in place to support the growth of the local textile industry, including banning the importation of used clothing and shoes, and imposing a 20% import duty on new clothes.

Industry standards in the circular economy

In order to ensure that the circular economy is functioning as intended, various formal and informal industry standards have been put in place.

For example, the International Organization for Standardization (ISO) has published a number of standards related to the circular economy, including ISO 14040 and 14044 on Life Cycle Assessment as well as a circular economy standardization roadmap and technical committee on how ISO standards can support the implementation of circular economy principles.  The British Standards Institution (BSI) has also published a number of standards related to the circular economy, including the BS 8001 Framework for implementing the principles of the circular economy in organizations.

Trade associations are also active in terms of standard-setting.  For example, in 2012, a Voluntary Agreement on Textiles was established in Europe with the aim of ensuring that all textile products placed on the European market are designed to be durable, re-usable, repairable, and recyclable.  The European Recycled Textile Association (ERTA) has developed a number of voluntary standards and guidelines related to the recycling of textile products, including the Recycled Textiles Product Category Rules (PCR) and the Recycled Textiles Quality Guidelines.

A number of industry-specific initiatives have also been put in place, including the Clothing and Footwear Industry Partnership for a Circular Economy in Europe, which was set up in 2019 in order to help the clothing and footwear industry move towards a circular economy business model. A number of informal voluntary programs have also been established with the aim of promoting the circular economy.  The Clean Clothes Campaign, for example, is a global alliance of labor rights organizations that works to improve conditions and empower workers in the garment and sportswear industries.

Meanwhile, the Ellen MacArthur Foundation, a UK-based charity, is one of the leading organizations working on the circular economy, and has developed a number of resources to help businesses transition to a circular economy, including the Make Fashion Circular initiative. Equally, the Massachusetts Institute of Technology (MIT) has developed the Circular Economy Platform, which is a digital tool that allows businesses to map out their supply chains and identify circular economy opportunities.

There are also a number of certification schemes that businesses can use to support circular operations, such as the Cradle to Cradle Certified™ products program.  To be certified, products must meet a number of criteria related to material health, material reutilization, renewable energy and carbon management, water stewardship, and social fairness.

Conclusion

The circular economy represents a new way of thinking about the design, production, and consumption of goods and services. It aims to close the loop on material flows, so that resources are used more efficiently and waste is minimized. The fashion industry is starting to embrace the circular economy, with a number of businesses implementing circular economy principles in their operations. Formal and informal industry standards, as well as certification schemes, can help businesses to transition to a more circular business model. However, the circular economy is still in its early stages of development, and there is no one-size-fits-all approach to implementing it. Businesses need to find the right model for their own operations, taking into account factors such as their supply chain, customer base, and product offering, as well as social and environmental considerations, including employee safety and labor rights. With the right planning and implementation, however, the circular economy can help businesses to reduce waste, save money, and create a more sustainable future for the fashion industry.