With the facts pointing to urgent tangible actions, societal pressure has mounted for change. A rapidly emerging theme in this transformation has been the circular economy. It has been touted by many across the globe as a system that can help tackle societal issues such as pollution, waste, biodiversity loss, and climate change.
To understand the role of the fashion industry in this sustainable ecosystem, it is first important to be able to define the circular economy. It is viewed as an economic system that utilizes an alternative approach to manufacturing, consumption, utilization, and recycling/regeneration of goods and products to help solve societal problems, most notably climate change. As opposed to the linear economy, which begins with the creation of products and goods and ends with the disposal of said items, the circular economy can better keep resources insulated within a regenerative loop that limits waste.
Source: Common Objective
The circular economy movement took off when the Ellen Macarthur Foundation, a charitable organization based in the UK and founded in 2009, was created to propagate the principles of the circular economy. They played a key role in a movement that is gaining momentum from government officials/policymakers and businesses alike, bringing it to the mainstream, and for good reason. It is now projected that by 2030 the circular economy could yield up to $4.5 trillion in economic benefits globally according to Jessica Matthews, head of sustainable investing at J.P. Morgan.
The fashion industry has been identified as one of the sectors that can do the most change for good while also showing flashes of economic prowess, which has piqued interest among investors. With such high financial upside along with the concept still being in the early innings, (Only 8.6% of the global economy is circular in a world that consumes 100 billion tons of materials each year) there remains a serious opportunity for new business innovation and capitalization within the market. Sustainable fashion models serve as crucial pieces in this movement and are undergoing disruption in attempts for companies to rebrand appearance and function to adapt to changing consumer demands and meet sustainable measures.
There remain serious questions, however, on circular methods within the fashion industry. Is it practical from a business standpoint to adopt changes? Will consumer demand flow and adjust with these changes? Can tangible change be made rapidly to best mitigate climate change and other consequences? To answer these questions, let’s first analyze some of the more popular forms that the circular economy has taken space within the fashion industry.
How Does the Fashion Industry stack up?
The fashion industry has evolved rapidly in recent years with fast fashion, defined as the mass production of cheap clothing for rapid production, and has caused serious damage to the environment. The evidence is quite clear with 64% of 32 billion garments are in a landfill within a year and the fashion industry being responsible for nearly 20% of the world's wastewater. These are only a few of the multitude of negative impacts created by this industry and thus have created a demand to begin mobilizing sustainable tactics.
Four core components of the fashion industry’s movement towards a circular economy include:
Upcycling
Resale
Rental
Product Maintenance
Upcycling
Upcycling is defined as the repurposing and recycling of the fabric of garments and clothes that can be sold. This often includes taking old or damaged clothing and transforming it into something new. It is important to understand that upcycling is different from recycling, which is the breaking down of fabrics and refurbishing them into something completely different, as opposed to keeping the integrity of the old piece intact. Recycling is also much more chemically intensive and utilizes harmful substances to achieve desired results, so upcycling has presented itself as an extremely enticing alternative.
Companies such as Fanfare or Beyond Retro, have had success in repurposing old or vintage pieces into stylish apparel that reflects fashion forecasts and promotes the prolonging the life of used clothes. While the reviews on upcycling are generally positive and it is one of the more established facets of the fashion circular economy, doubts have been casted. The main knock is it remains pricey due to the manual nature of the process and the need for large quantities of resources and material. This has caused concerns on whether it is viable for businesses to scale up a model founded upon upcycling, due to the high-cost barrier and technological deficiencies that limit the physical process of repurposing clothing.
Resale
Resale is a concept that has been around for a long time (i.e. thrifting), however, has seen a rapid rise in interest in the last few years. It is an extremely straightforward model that reduces waste through the buying and selling of clothing from peer-to-peer. In what used to be a more niche industry, the landscape has become increasingly dynamic with the blossoming of companies such as Depop, Poshmark, and Grailed. These companies have established themselves within the mainstream as the entire resale sector saw 25% growth in 2020 compared to 2019 according to a report by thredUP.
The main downside with resale has always been that it has required the largest amount of consumer behavioral changes, but indications are showing that change is occurring simultaneously with increased traction. According to a report by BNY Mellon, interviews with leading resale apparel companies have estimated that over 50% of millennials and Gen-Z have purchased something from resale in the last calendar year. Findings also showed that consumers aged 18-37 have adopted resale buying of clothing more than twice as fast as older generations and are a driving force behind an expected compound annual growth rate (CAGR) of 39% over the next five years leading from $7 billion to $36 billion in sales. The data is clear; the resale market is truly an integral part of the vision for a circular economy and the consumer trends are finally starting to align.
Rental
Rental is another straightforward component of the fashion circular economy that can provide added value from a sustainability standpoint while also providing opportunities for market entrants that are able to overcome some hurdles. It initially arose as a viable concept competing with upcycling due to consumer behavioral tendencies to want to obtain clothes in rapid succession and in mass quantities. This has opened the door to startups that wanted to interface a product-as-a-service within the fashion industry.
The most notable and arguably well-known player in the space currently is Rent the Runway. The basic business model for a rental company such as Rent the Runway includes a fee or subscription paid by the consumer in return for the ability to rent clothes for a specific amount of time. After this period is over, the consumer returns the product, and the company can then rent it out to other customers. This allows for people to stay up to date with the newest trends and try clothes without having to buy and dispose of clothing that no longer suits their needs or size.
From a surface analysis it sounds like a great plan, however, some caveats remain that could limit the potential for market entrants and established companies. One major hurdle is the logistical and supply chain costs that are incurred through the transportation of these clothes, ultimately resulting in a massive carbon footprint that the rental industry was trying to limit in the first place. For the circular economy to truly measure its impact, it cannot afford to integrate unsustainable practices such as non-stop transportation and chemically intensive washing processes. These are crucial problems that can hinder the rental industry in the long term if not solved.
Product Maintenance
This last component entails clothing brands offering services to repair or refurbish products that are worn down, have deformities, or have any other relevant issues. Product maintenance has had the least amount of popularity among brands but deserves equal recognition for its potential to contribute to the circular economy while also providing business upside. Due to consumers not wanting to see repair or maintenance services offered when investing in a product, fast fashion and luxury brands have stayed away from this strategy.
The benefits from a sustainability standpoint are straightforward as product maintenance helps to incentivize the longevity of products. However, the biggest potential lies within brands adjusting their stance towards consumers. By offering product maintenance services, brands are forced to put more effort and care into the quality and longevity of products, therefore making better and ultimately more sustainable goods. Also, companies such as Patagonia have shown that distancing themselves from consumerism can pay off. Through offering a lifetime warranty and free repair services and combining it with its hardline stance on environmental activism, Patagonia has sung a song to the tune of $1 billion in sales per year. Sustainability pays, and the new age of consumers are more than ever willing to put up top dollar for a high-quality, green product.
Main Takeaways
It remains to be seen how the fashion industry adopts circular methods, but the evidence is clear that this transformation is well on its way. With impending environmental consequences looming larger by the day, it is only a matter of time that a commitment to sustainable values is made by all businesses. As consumer interest begins to shift towards brands that are being eco-friendly, it is imperative that fashion companies strategically position themselves to contribute to this environmental movement. There remain barriers to make these changes profitable, however, as resource intensive processes pose to limit the effectiveness of circular methods. Innovation being able to solve some of these problems remains to be seen, but there is strong reason to believe that sustainable strategy and branding will continue to be a vital component of the fashion industry for the foreseeable future.