Circular Advisors

The power of SMEs to achieve a fairer, cleaner and more inclusive industry is massive. Brands can unlock major value from adopting circularity in their business models.

 

The road towards a green recovery of fashion

 

The impact of the Covid-19 pandemic has seen governments around the world focusing more and more on the fragility of the world’s economies, ecosystems, and the devastating consequences of climate change. A global movement is gaining momentum with over 100 countries setting up zero-carbon goals by mid-century, while industries are also putting ambitious science-based targets on their agenda to reduce their carbon emissions. However, according to the recent McKinsey’s Fashion on Climate report, the fashion industry is still a major concern. If it continues along the path it is pursuing it will miss its 1.5-degree celsius pathway by 50 percent. 

The fast fashion industry, fuelled by the rise of the middle classes and increased spending power, has made the industry highly wasteful and pollutant with its take-make-dispose model’. 

Indeed, the environmental and social damage the linear model causes, as well as the economic value lost is immense and needs to change. 

According to the Ellen MacArthur foundation, a swift change of mindset in business models in the fashion industry could unlock a staggeringUSD500 billion worth of value a year from resource recovery, as well as a significant reduction in environmental damage. With the advent of the COVID-19 pandemic, the opportunity has never been greater for a systemic industry reform to create new regenerative and circular business models to build economic, social and environmental capital. 

Before the pandemic, the fashion industry, one of the biggest economies in the world, generated $2.5 trillion in global annual revenues.

However, the current health crisis has had a profound effect on the industry with an estimated 93% decline in profits in 2020, mainly due to store closures during global lockdowns, supply chain disruptions and consumer restrained spending behaviour. Consumers are increasingly expecting more from businesses when it comes to sustainability, and their decisions to engage with certain brands due to an awareness of the impact they have on the environment. This is leading to a shift in behaviour, favouring brands that are more sustainable, ensuring a safer and more prosperous future for generations to come. The industry needs to respond to this wind change by delivering a green recovery and making better connections with its consumers if they want to avoid being left behind. The rise of fast fashion, described as ‘inexpensive designs that move quickly from the catwalk to stores to meet new fashion trends’, has been significantly responsible for increased environmental damage. 

It is typically high volume and low quality as well as low price, which means that garments are made of cheaper materials, that are less durable and more pollutant. An average garment is only worn seven times before being discarded, causing untold ecological devastation. As one of the major polluting industries, fashion is responsible for 10% of the total carbon emissions in the world today, as well as being the second-largest consumer of water, with 1.5 trillion litres used annually to manufacture clothing.

Fashion is the second
largest user of water,
with 1.5 trillion litres of
water is used annually to
manufacture clothing.

I N T E R G O V E R N M E N T A L

P A N E L  O N  C L I M A T E

C H A N G E ( I P C C )

Most garments, textile surplus, and items that are left unsold end up in landfills for incineration, an equivalent of one truck full of textile waste are dumped in landfills every second. According to The UN Environmental Program and The Ellen MacArthur Foundation, only an estimated 1% of used garments are recycled into new ones.

Another major concern is also the threat to our health, with the release of chemical waste from the use of chemical substances in dyes, and microplastics from fibres that end up in our rivers and oceans every year. With the rise of fast fashion, we have also seen the rise of misleading sustainability claims, or ‘greenwashing’. This is when organisations claim environmental initiatives without the actual implementation of business practices, making vague claims or
displaying a pernicious lack of transparency. Some fashion companies are using the opportunity for demand in sustainable products to label them as ‘natural’, ‘eco’, or ‘sustainable fashion. More transparency across the supply chain with supportive data is required so that consumers are not misled by these greenwashing practices, and brands are held accountable for when they do. Despite all of this, more recently, we have seen serious commitments by leading brands and initiatives. 

The German brand Zalando for example, and their recent collaboration with The Sustainable Apparel Coalition (SAC) is setting to drive transparency across their supply chain, measuring performance around carbon emissions, human rights and environmental targets. We are also seeing more and more companies committing to science-based targets, and according to Sustainable Brands, more than 110 fashion SMEs are participating in a collective movement known as the 2020 Circular Fashion Pledge. This movement sees companies pledging to three commitments:

The road towards a green recovery of fashion

Other important advances are ‘The UN Fashion Industry Charter for Climate Action’, a serious commitment by the industry to meet zero carbon targets by 2050. Over 100 participants including major brands such as, Adidas, Inditex, Gap, Burberry and Decathlon have already
joined the initiative since its launch during COP24 in Poland in 2018. However, although this is encouraging it is nowhere near enough and far wider participation and commitment is required. Moving from the current linear model towards circularity is a solution to help reduce the negative impact and unlock major benefits for the industry, as well as for consumers and environmental protection. As reported by the Ellen McArthur Foundation, new business models are required to ensure a more sustainable industry: those that increase clothing use, those that rely on safe and renewable inputs, and those that create
innovative solutions to turn used clothes into new ones, through repairing, reusing or recycling.

Now more than ever, the industry needs robust plans for innovation, collaboration, and resilience in order to meet government targets and consumer demand as well as to avoid future economic shocks. Take-back schemes are great examples of how garments can be
recovered from the consumer and reintroduced into the processing and manufacturing cycle. This process can either extend the product life or keep materials in use for longer by repairing or recycling. 

Collaboration and partnerships are essential to advance the sustainability and circular economy agenda. At Circular Advisors we collaborate and build strong partnerships with innovative and purpose-driven organisations to close the loop for sustainable economies, promoting thriving societies and a prosperous future. To this end, we are currently collaborating with iCEEP, an organisation based on a circular economy innovative business model through the implementation and management of digitised product take- back schemes. These programmes incentivise consumers to return items and help brands increase customer engagement while reducing waste by recovering valuable materials from existing products In order to accelerate engagement towards zero-carbon goals and waste reduction commitments, connecting brands to innovative solutions will help businesses advance on their sustainability agenda, while at the same time creating better customer propositions. The fast fashion industry needs to move faster towards circularity in order to replace the current linear model. Creating partnerships and collaboration to adopt circularity will be an essential path for the green recovery of the sector.

Eva Morales
CEO & Founder Circular Advisors
January 2021

“New business models that
increase clothing use, safe and
renewable inputs, and innovative
solutions to turn used clothes
into new, through repairing,
reusing or recycling, are key
elements to ensure a more
sustainable industry”

E L L E N M A C A R T H U R
F O U N D A T I O N

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