Marilyn Martinez
Project Manager, Ellen MacArthur Foundation
Circular business models for fashion could decrease greenhouse gas emissions by providing consumers with alternatives to fast fashion.
Since 2019, despite the COVID-19 pandemic, seven rental and resale platforms for clothing have reached unicorn status. Valued at more than USD 1 billion, they aim to provide people with access to fashion without countless new products needing to be made. If this is achieved, businesses like these can play a key role in tackling global challenges including pollution and the climate crisis.
Collectively termed ‘circular business models’, this opportunity is being realised by businesses including Hack Your Closet – which offers a personalised clothing subscription service of used or overstock items – and GANNI, which remakes and rents garments to keep their designs at the highest value.
Reducing use of carbon emissions
Resale, rental, repair and remaking models alone have the potential to provide a third of the emission reductions necessary to put the fashion industry on a 1.5-degree pathway if they can capture 23% of the global fashion market. This would amount to a reduction of around 340 million tonnes of CO2e annually by 2030, more than the annual GHG emissions of Thailand or France.
But this potential can only be realised if circular business models become mainstream, thereby achieving a fashion industry where waste and pollution are eliminated, products and materials are circulated and nature is regenerated, by design.
Product design is also crucial. Not all products on the market have currently been designed to be used more and for longer.
Changing performance indicators of success
Yet, today, success is based on ‘linear’ performance indicators – defined by an increase in sales of products made from finite virgin materials. This discourages the uptake of circular business models and limits their ability to displace production of new products.
Shifting performance indicators to measure revenue generated per product, for example, could incentivise businesses to develop multiple revenue streams and encourage users to opt for its circular offerings.
Product design is also crucial. Not all products on the market have currently been designed to be used more and for longer. This means that delivering them via business models that extend their use is currently not economically or environmentally viable.
Improving fashion supply chains
How supply chains are set up also matters. Currently, fashion is built for a one directional flow of products – reverse logistics infrastructure does not exist at scale in local geographies where these products are being sold.
While there are challenges to overcome, circular business models are expected to continue growing as people increasingly adopt new ways of accessing fashion. This shift represents an opportunity for new and better growth if fashion businesses fully embrace circular business models at their heart.