The paper is a response to the need to act upon the impacts of the Covid-19 pandemic and to highlight how policymakers can find new solutions and ways of thinking to redesign the current economic model for a resilient recovery.
The two investment opportunities within fashion are in regards to an increase in rental and resale business models and an increase in the recycling, sorting, and collecting infrastructure.
The current state of the fashion industry
The fashion and apparel industry have been among the most affected, by the pandemic sectors, since it is heavily reliant on a global supply chain. All in all, a 27-30% reduction on year-on-year revenues for the global fashion industry is predicted for 2020.
Also, changes in buyers behaviour and the consequences of the lockdown, led to exports being cancelled or suspended by companies. This did affect the livelihood of more than 70 million workers along the supply chain. Due to the lack of recycling possibilities there is a high inventory crisis, that once again highlights the wasteful nature of the industry.
Trends identify that e-commerce is continuing to grow and that companies with built-in digital and analytics capabilities are believed to be more resilient during the pandemic, which could help them make each step of the value chain better, faster, and cheaper. Furthermore, customers’ price sensitivity after the pedantic will force fashion businesses to re-evaluate their current business models.
For the fashion industry to overcome these new challenges while leveraging future trends, investment in circular economy opportunities that promote increased utilisation over increased consumption can offer attractive opportunities.
MacArthur Foundation sets out a vision for fashion, where clothes are used more and made to be made again, from safe, renewable and recycled input.
Two particularly interesting circular investment opportunities emerge, that will be explained more in depth .
Rental and resale business models for clothing
This means investing in opportunities of rental and resale business models that can generate numerous economic benefits through increasing clothing usage in alignment with evolving customer demands.
By enabling the same item to be obtained and utilised by many customers over its lifetime, clothing rental and resale models can increase the revenue stream per garment when compared to traditional linear models. Furthermore, due to the increased utilisation rate, combined with the lower costs that may be achieved as raw material needs are reduced, allows for lower price point per garments.
This offers a valuable opportunity for the more price sensitive consumers segment, as well as for customers who want to reduce their clothing consumption following the pandemic.
A great benefit for the environment is the reduction in carbon, water and waste footprint, which can already be ensured by 5-10% when a garment's lifetime is extended merely by three months. Compared to buying new, one pre-owned purchase is said to save an average of 1kg of waste, 3,040 litres of water, and 22kg of CO2. Second-hand and pre-owned purchases also prevent the purchase of a new item by 65% in the US and UK.
Companies are increasingly pressured to rethink their way of making business, since more and more policymakers and organisations are drawing attention to the environmental impacts of the fashion industry. One of them is the Circular Economy Law that bans the destruction of unsold or customer returned items. Fortunately, there are many opportunities for businesses, with the renting and reselling business models increasing lately, even before COVID-19. The secondhand market is projected to reach nearly twice the size of Fast Fashion by 2029, with resale models expected to drive the increase (growth projected at 414% in the next five years). Something that will also boost business models like this, is the increased use of digital technologies.
One important factor to ensure success is the role of design. Garments need to be designed to enable safe and extended circulation with durable and non-hazardous materials that can sustain several usage cycles. At the same time, design decisions need to be made in favour of the emotional durability of the item.
Clothing collection, sorting, and recycling infrastructure
With recycled fibres expected to replace virgin sourced materials at an ever increasing pace in the textile sector, investments into clothing collection, sorting, and recycling infrastructure can offer many economic and environmental benefits that can contribute to the creation of a more resilient fashion industry in the future.
Currently, of the total fibre input used for clothing today, 87% is landfilled or incinerated— equivalent to burning one rubbish truck full of textiles every second. A meagre 13% of textiles get recycled in some way after clothing use, 12% are downcycled into lower value uses that are often extremely difficult to recirculate, while only 1% gets recycled into new clothing.
The pandemic has only exacerbated these issues and if these inventories are not repurposed or saved for next year, the risk of an increase in the total amount of waste is high as businesses may destroy their products to avoid flooding the market. If instead of incineration or landfill, these materials were captured and recirculated, the lost value of textile waste amounting to more than USD 100 billion annually could be retained, while new jobs in the collection, sorting, and recycling facilities could be created. On one hand, disposal costs associated with clothing waste management could be avoided by increasing material circulation, while on the other hand the increased amount of recycled textiles available could reduce total material costs for apparel production. One example being the UK, where an estimated cost of approximately GBP 82 million is incurred annually for landfilling clothing and household textiles.
This could not only save money but also benefit the environment tremendously. Increased clothing recycling can help lower the strain, placed on natural resources that is caused by the cultivation and manufacture of virgin inputs. For example, by reducing the sector’s reliance on virgin resources, some of the 93 billion cubic meters of water used annually for textile production could be saved, while the GHG emissions of clothing production could also be lowered.
With more customers being environmentally conscious, and responsible shopping habits predicted to grow at a fast rate, companies in collection and recycling programmes can better acquire and retain these customers. There is also increasing support for clothing circulation, such as tax benefits in some areas. Besides this, tighter regulations around textile waste may also become more commonplace, making increased clothing collection, sorting, and recycling a requirement. There are a few important factors necessary to guarantee success for such investments. One of them is the role of design because recycling opportunities like this can only be guaranteed by more conscious concern for material durability and garment construction.
Further, investments are needed for developing formalised, physical clothing collection, sorting, and recycling infrastructure. Especially the technological infrastructure should be prioritised, to improve clothing sorting and recycling, such as automated optical sorting technologies and technical innovations that enable material tracking and product information encoding. All substantially increase the speed and accuracy at which items get sorted.
This is critical for recyclers to be able to acquire high-quality feedstocks that they can better utilise, and it also optimises the sorting process to a great extent.
At the same time, the textile recycling infrastructure and technology itself requires investments, in order to retain the greatest value possible of the material and prioritising innovations in clothing-to-clothing recycling, which reduces the amount of downcycled materials.