Circular Business Models in Fashion

When thinking about opportunities and barriers that present throughout the fashion industry in relation to its drive for greater sustainability and circular efforts, I recommend having a browse through the following reports and articles. They highlight key issues and offer thoughts on possible solutions.


The focus of circular transformation in fashion has been largely on developing sustainable materials, establishing take-back schemes, and improving recycling infrastructure. These solutions are commendable and form an important part of a circular fashion system. However, they only serve to treat the symptoms of the overall inefficiencies within the industry. They currently lack scale and are reactionary to the linear business model. Moreover, today, just 1% of clothing is recycled back into clothing, 73% goes to landfill[1].



The big picture


The Transition to Good Fashion (2018) report by  DRIFT for Transition  is a good read for anyone looking for the big picture overview. It provides a ‘systems thinking’ review of the fashion value chain and maps key change aspects for making fashion more sustainable and circular.  You can find a systems change map, transition pathways, change levers and many more in this report developed for C&AFoundation/Laudes Foundation and Fashion for Good.


Analysis of now vs. desired and the transition pathways


A circular fashion economy requires a combination of approaches to create desirable, low-impact and long-lasting garments whilst still ensuring profitability.


The so called ‘Rubik’s cube’ consists of a combination of:

  • New garment design strategies
  • Use of sustainable materials
  • Advanced recycling technologies
  • New and transparent ways of supply chain management
  • Service-oriented and demand-led business models



Financial viability of circular business models 


The Future of Circular Fashion: Assessing the Viability of Circular Business Models (2019) report by Fashion For Good and Accenture aims to address one of the main barriers to circularity for established fashion brands and retailers – the financial viability of circular business models and its scalability.


The report analyses, across four industry segments: value, mid-market, premium and luxury, three circular models:

  • Rental
  • Subscription- rental
  • Re-commerce


Through the analysis, it looks at the relative profitability of each business model on a per unit basis. At the same time, it focuses on consumer activities and provides insight on where and how these circular models can be made commercially viable.


Each of the models has the potential to move the goal posts  and provide commercial viability for specific segments. They could enable a shift from a focus on volume to focus on quality that is driven by garment durability and number of uses/ability to re-use, re-design garments.


Visual representation of the financial viability of circular business models



Metrics, displacement and utilisation of clothing and other challenges


The recent article by Gwen Cunningham identified some of the current challenges the fashion industry grapples with when it comes to circularity. They span from preventing greenwashing, having credible metrics, and design as a success factor,  to ensuring that circular business models are really sustainable.


Below are some of the key take-outs:


  • Alignment of metrics and how they are communicated

There is currently a lot of confusion about communicating impact. Many businesses use outdated metrics which leads to unintentional greenwashing. There is a need for education about the metrics and consistency in their use to add to the credibility.


  • Assumption of displacement and utilisation of clothing

Clothing is nowadays extremely underutilised. The average number of times before a garment ceases to be used has decreased by 36% compared to 15 years ago worldwide [2]. Extending the active life of clothing is considered one of the most effective ways to reduce the overall impact. Hence the rental or re-sale models are deemed as beacons of circular fashion. However, it should not be forgotten that consumers are not stopping buying new garments. Paradoxically, renting/re-sale may unintentionally add to overconsumption in its own specific way.


  •  Focus on building a low-impact, high-value end-of-use supply chain 

Rental and resale models require resources and capabilities, e.g. the process of collection, cleaning, sorting, repair, laundry and second hand merchandising.  We should not forget that each part of this new circular value chain has an environmental or social impact.




[1] The Future of Circular Fashion: Assessing the Viability of Circular Business Models, pg. 6

[2] A New Textile Economy: Redesigning Fashion’s Future (2017), pg.36

Images: The Transition to Good (2019) and The Future of Circular Fashion (2019)