What Is Circular Economy? Explained With an Example

Circular economy is defined as a model of production and consumption where the resources, supply chain, energy, waste, finished goods all fall into the circularity of using. It aims to extract as much use as possible from a product for the maximum period. According to the “cradle to cradle” school of thought of circular economy, waste is not a defined entity in the circular economy as waste from one process is the raw material for another circular process. 

The clothing and fashion industry has struggled a lot to become more sustainable. Fast fashion brands find it difficult to lower their impact. Therefore, doing a circular economy is something that can improve their footprint significantly. Rethinking the business models of the fashion industry, the companies can choose a rental, resale, refurbish and remake circular model. By 2030, these models are expected to be worth USD 700 million, making up 23% of the fashion industry [1].

Since 2000 there has been a massive decline in clothing utilization, whereas the production has doubled [1]. The model generates revenue from raw material production through resale, rental, repair, and remake. Rentals include private and large-scale rental and subscription models, whereas resale consists of an offline or online marketplace for second-hand products. 

Brands have also launched take-back programs. The model also includes repairing to return the product back to a reusable state. The remake involves breaking down the product into the components that can be reused in making new products by re-dyeing and repurposing. This model offers business opportunities and revenues with multiple revenue streams and better resource productivity, reducing costs.

Although this model fits the circularity criteria with a successful revenue scope, it does not necessarily produce environmental impact benefits. The result of a complex supply chain and increased inventory also increases the amount of greenhouse gas emissions. The significant barrier in the industry is that it measures success based on the volume of goods sold. Hence, rental, repair and take back programs don’t add to the success parameter. 

Another barrier is the supply chains which are compatible with one-way production and distribution and are not yet accustomed to circular chains. Thirdly, the products have limited usability and may wither up due to the circular model. Lastly, the circular model prevents companies from exploring other ways to reduce impact adopt newer technologies, which may be linear, but prove to be better at impact.

The scalability of this model in the fashion or clothing industry can be multilayered. The lowest level might include small private groups, building peer-to-peer communities, slowly moving up the hierarchy with public rentals, online platforms, and industry-level subscription models. Labels including The North Face, Timberland and Vans are considering introducing a rental clothing scheme as part of a new focus on sustainability. 

MUD Jeans, Patagonia, H&M, and many others have a successful take-back programme offering customers coupons for their next purchase. Levi’s have a strong textile recycling initiative. Another way to scale the model can be the industry-wide approach to the repurposing of cloth with multiple channels for clothes without the brand's distinction, but the raw material and type of cloth. 

This will push the level of remaking to a higher level as the remaking no longer depends on the brands doing it but will be done for all kinds of clothes disposed of.

The fashion industry also needs to reconsider its fast-fashion concepts where its model encourages the mass to buy more and use more. The first aspect of doing circular economy is also Reduce. The business model change is required, which tells people to consume less. 

Despite these brands claiming that they have moved to a more circular model and secured their sustainable future along the way, many fashion initiatives simply scratch the surface of real sustainability. Luckily, consumer sentiment is shifting as people want to dress fashionably and ethically and sustainably.

Authored By: Apoorva Garg

References:

[1] https://ellenmacarthurfoundation.org/fashion-business-models/overview