Why Should I Care about Circular Economy?

There are so many causes that the industry needs to focus on, what is so special about circular economy?

In recent years, the average North American consumer is throwing out 5 times more clothing than 25 years ago. Value Village stated an alarming statistic - 85% of what we own ends up in landfill - that’s 10.5 million tons of clothing. In Canada, Canadians created enough textile waste in one year to create a mountain three times the size of Toronto’s Rogers Centre Stadium, which has the capacity for 53,506 people. This is only Canada, with a population of 36 million. Imagine the statistic in the US and China, where the population is 10x and 38x larger, respectively.

Waste is one of the pressing issues that exacerbates the global climate change but also many environmental issues such as landfill shortage and stock burning.

These stats have shed light on the ugly side of the fast fashion industry - however premium and luxury soft goods industry is not entirely innocent. From stories about burning overstock and lack of sourcing transparency, there are many different challenges that plague the entirety of the garment industry (fashion, premium and luxury).

Good news though, there is already a working model for circular economy in this industry - though still in its infancy - it has been prove to have demand and is financially viable. What are they?

The rental market is defined as specialized products for one-time events, and it is quickly outgrowing the ownership model. It is generally time-limited with no option to purchase.

The subscription model is maintained by a monthly fee, with a number of products available that can be exchanged by the consumer at any time – with a price reduction.

The recommerce model generally involves both recovery and resale of products (e.g.,. vintage or second-hand stores) – for the purpose of this project report, it will include items that can be resold by the original retailer and not just within a secondary marketplace.

Defined by Accenture Strategy and Fashion for Good, “The Future of Circular Fashion: Assessing the Viability of Circular Business Models”, Fashion for Good, 2019. 

Great! If it is working already, why are we still discussing it?

The top three business models listed still offer room for improvement, as the models in their current form still offer opportunities to exit the circle. Therefore, these models do not function as a truly closed circle – see figure below.

Current Circular Economy Business Models

From the figure above, the rental market seems to be able to keep garments in the loop for longer than the subscription model. The recommerce model seems more like a single use solution and offers multiple opportunities for garments to exist the loop. Currently, they are the top feasible business model as these businesses are scalable and financially viable. In addition, integrity and authenticity matter tremendously in the luxury industry, especially in the rental, subscription or recommerce process – as the brand or platform needs to guarantee its authenticity, and that of the product being resold.

Recently, some critics of the rental and subscription models have suggested that the models fuel mass consumerism, noting that sustainability is created when the consumer forms a connection with the garment they purchase. In which, rental business models creates the exact opposite scenario, as rented garments have no real value to the consumer, and therefore offers little incentive to care for garments, thereby shortening the clothing’s life cycle compared to a purchased item. The models listed above are great foundations to creating circularity in the luxury industry, however there much more room for improvement to truly create a circular business model. The recommendations in this report will attempt to create a circular business model while meeting the feasibility criteria of scalable and financially viable. Before the recommendation however, it is important to do a deeper dive in the industry specific challenges that pulls circularity away.