As consumers become more engaged with sustainability issues, circularity could be the key that unlocks the door to a more sustainable future.

This article appeared first in The State of Fashion 2021, an in-depth report on the global fashion industry, co-published by BoF and McKinsey & Company. To learn more and download a copy of the report, click here.

When it comes to protecting the environment, the fashion industry knows that “less is more,” meaning the less impact we have on our planet, the more benefits will accrue for businesses, people and natural life. One promising way for fashion to reduce its environmental impact is by scaling circular business models, through which companies employ a range of strategies to reduce waste and make more efficient use of resources, as well as help their customers to do so, too. In 2021, we see circularity moving from the fashion fringes towards centre stage.

The impetus to act on the environment is emphasised by shifting consumer attitudes. More than three in five consumers in a recent McKinsey survey said environmental impact is an important factor in making purchasing decisions. Regulators and policy-makers are also on board, amid a raft of upcoming initiatives to promote circular practices (such as in the EU) and prohibit the destruction of luxury goods, as can be seen in France. More generally, measures such as the EU’s carbon border tax will promote circularity by making the economics of onshore recycling and other circular models more attractive.

An industry-wide circular business model is a lofty ambition — and is a long way from being realised. Despite efforts by some players, as much as 12 percent of fibres are still discarded on the factory floor, 25 percent of garments remain unsold, and less than 1 percent of products are recycled into new garments. Given these metrics, action is an imperative and an inevitability. Indeed, circularity may become the biggest disruptor to the fashion industry over the next decade.

As the industry makes progress with the “Rs” — reducing, recycling, refurbishing, reselling, renting and repairing — few decision-makers are under any illusion about the scale of the challenge. Despite good intentions on the part of some players, garment production volumes are predicted to grow by 2.7 percent annually between now and 2030. The priority, therefore, must be to set circular strategies, tackle scalability challenges and take concerted action to scale solutions.

The Challenges in Scaling Circularity

The way in which value is created in circular systems is radically different to the way it is created in linear systems. In essence, a single garment can create value repeatedly — through sale and resale, repeated rental, or being sold, repaired, returned, refurbished or recycled, and resold again to start the loop over. This value-multiplier effect has prompted several leading retailers to get involved. Selfridges’ Project Earth initiative aims to help customers buy “pre-loved” items (in its Resellfridges range) or rent (through partner Hurr Collective) and repair. Peer-to-peer social shopping resale app Depop saw a 300 percent year-over-year increase in items sold during the Covid-19 pandemic, reflecting rising consumer demand for pre-owned purchases.

With some of the industry’s leading names showing interest, there is little doubt that circularity is gaining momentum. However, three key barriers are preventing adoption at scale:

Capturing value requires durability or recyclability. Without durability or recyclability, there is likely to be significant erosion of product value. Refurbished products can command relatively high prices if the refurbishment is carried out reliably, which is not always easy when clothes are stretched or stained and accessories scratched or marked. Similarly, with most garments composed of a mix of materials, recycling is not easy.

Enabling circularity involves a complex web of logistics. Resale transactions are currently mostly peer-to-peer, with individuals deciding whether the resale value is worth the time and energy required to wash, photograph, describe, package and send. In “Fashion on Climate,” our analysis showed that, to align with the 1.5-degree pathway in 2030, 20 percent of garments need to be traded through circular business models, so greater scale is required. The subscription rental model, for example, requires many users for the economics to make sense — and again, the key challenges are logistical, including laundry and delivery.

Engaging consumers requires overcoming stigmas. While circularity is winning fans among some consumer groups, it is still an abstract idea to most and terms such as recycled, upcycled, repaired and refurbished still have negative connotations. Similarly, consumers are willing to return recent purchases with the incentive of a refund, but struggle when a garment of unknown value sits forgotten at the back of a wardrobe.

What Will It Take to Scale Circularity?

The apparel ecosystem is fragmented, with no single player accounting for more than 1 percent of the market. Standardised solutions, therefore, are unlikely to emerge anytime soon. More probably, we will see a variety of strategies led by a diverse cast of actors and predicated on three foundational capabilities:

Embracing Sustainable Design. Circularity starts on the drawing board, and with the textiles and materials that designers use for their creations. One company that has embraced the sustainable design ethic is London-based Dai Wear, which employs recycled and recyclable fabrics to produce performancewear. The company uses biodegradable yarns for seams and air-dried fabrics to reduce washing needs.

“Sustainability is obviously more important than ever, but it is also becoming the baseline requirement for all apparel companies,” Dai Wear Chief Executive Joanna Dai said. “We find increased organic engagement and followers slightly outside of our core target niche who align with our values and buy into our brand.”


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Image Credit : Francois Le Nguyen

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