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The fashion industry needs a deep transformation. Manufacturers hold the key to circularity.

Under pressure to reinvent fashion's ‘take-make-dispose’ business model, brands and retailers must get their supply chain partners involved. How can manufacturers accelerate the shift towards a circular economy?

The fashion industry, founded on billions of consumers getting dressed up with places to go, has been a major casualty of the Covid-19 pandemic.

Its profits are expected to dive by 93 per cent in 2020, and global revenues are projected to shrink by 27 to 30 per cent compared to the previous year, according to consulting firm McKinsey and industry intelligence provider The Business of Fashion.

As the pandemic led to retail stores being shut and people across the world being confined to their homes, industry observers called for a departure from a business model that relies on selling ever more unnecessary products to customers, at prices that leave millions of farmers and factory workers without viable livelihoods.

“Covid-19 has exposed the fallacies of the current ‘pile-high-sell-low’ and ‘take-make-dispose’ business models, and the fashion industry now has a unique window of opportunity to make fundamental changes as the world emerges from the pandemic,” said Ariel Muller, managing director, Asia, of international sustainability non-profit Forum for the Future.

Brands and retailers cannot do it alone, the non-profit argues in a recent report. They must bring on board and invest in their supply chain partners, if the industry is to achieve the “deep transformation” that is rapidly needed.

“Manufacturers hold the key to practical execution of industry transformation,” said the report, Making the Leap to Circular Fashion.

Covid-19 has exposed the fallacies of the current ‘pile-high-sell-low’ and ‘take-make-dispose’ business models, and the fashion industry now has a unique window of opportunity to make fundamental changes as the world emerges from the pandemic.

Ariel Muller, managing director, Asia, Forum for the Future

Equitable and circular: All hands needed on deck

A deep transformation in fashion will entail an equitable shift towards the circular economy, said industry observers.

Circular fashion refers to an industry model in which waste and pollution are designed out from the life cycle of the product, and products and materials are kept at their highest value during use. At the same time, the industry must respect human rights and constantly innovate as it serves consumer needs, the experts said.

New technologies and business models must be tested and scaled, and their impact on the future workforce must be considered, stated the report.

“This can only happen if brands, designers and industry bodies step up efforts to include supply chain voices in reimagining how fashion items are designed, made, sold and used,” said Forum for the Future, which produced the report at the end of a two-year innovation programme called Circular Leap Asia last year.

The programme, which aims to help apparel manufacturers, brands and retailers in Asia develop and scale circular solutions, saw the participation of three companies—Singapore-headquartered apparel manufacturer Ramatex, Taiwanese footwear fabrics maker Yee Chain International, and supply chain giant Fung Group’s knitwear supplier Cobalt Fashion.

Linear business models are so last season.

Gerrard Fisher, partner, circular business, QSA Partners

Maximising the value of resources, serving customers’ needs

“The crisis provides an opportunity to take much bolder steps towards the transformation of the industry for a low-carbon economy. There are opportunities at every aspect of the value chain—from connecting with consumers with a new narrative around sustainable consumption, to rethinking business models that underpin the sector,” said Muller.

The fashion industry has been on an “enormously unsustainable trajectory” in recent decades, and is responsible for up to 10 per cent of annual global man-made carbon emissions—a percentage greater that aviation and shipping combined, Muller noted.

Forum for the Future identified five areas in which manufacturers can help to scope and support circular opportunities across the value chain. They should prepare themselves to:

  • Increase the utilisation of clothes and other fashion products and reduce overall volume of production;
  • Eliminate the release of harmful substances;
  • Reduce the resources needed to produce textiles;
  • Optimise recycling of textiles at all stages of the supply chain; and
  • Shift to renewable inputs such as clean energy and bio-based or cellulosic raw materials, as well as materials that turn agricultural waste such as pineapple leaves to fibres.

The industry is presently not extracting the maximum value from materials and garments, which is “really just throwing money away”, said Gerrard Fisher, a partner at circular economy consultancy QSA Partners.

Known for its innovation and passion in the design of garments, Fisher said the industry’s strengths should be harnessed for better business models that meet customer needs. “Linear business models are so last season,” he said. “I’d like to see the fashion industry get a better understanding of their customers’ real needs after the pandemic.”

The way many customers work, socialise and relax has changed, and will continue to change, along with their wardrobe needs. “The fashion industry usually focuses on new product design but hasn’t innovated much about how customers use and access apparel,” he said.

Manufacturers and product designers, as well as brands’ marketing departments, should have conversations about how long their products will be used by customers, and what would happen to a garment after its first user does not want it anymore, Fisher said.

Such a discussion would set clearer goals for the product’s design and manufacture. For instance, if a garment is going to be low-priced and thrown away after a short period of use, biodegradability may be important, he said.

Human rights matter: The era of considerate purchasing?

According to Forum for the Future’s report, the pandemic could result in other changes to the fashion landscape that the industry must respond to.

As more customers shop online, fashion products may come to be differentiated by their origin—who made or designed them, and under what conditions. “As supply chain information becomes more valuable, will the industry move beyond price, speed and quality as the primary measures of success for manufacturers?” the non-profit questioned.

Post-pandemic, the industry could also see a wave of acquisition and consolidation. Stronger brands and retailers may seek to regain partial control of the supply chain to drive technological innovation and changes in business models, it stated.

As supply chain information becomes more valuable, will the industry move beyond price, speed and quality as the primary measures of success for manufacturers?

Making the Leap to Circular Fashion report

Post-Covid-19, Fisher said it is the smaller, nimbler and more sustainable businesses that may connect better with their customers, instead of larger and more conventional companies whose focus is to return to business as usual. “I do suspect that we will see a change of mood in the customer market, perhaps with a slight shift towards more considerate purchasing. I’m optimistic that some of the larger players will pick up on this and offer new business models to meet those needs,” he said.

QSA Partners, like the Circular Leap Asia programme, is part of the Laudes Foundation’s Bridging the Gap initiative, which aims to bridge the gap between knowledge and willingness to adopt circular models, and concrete action.

Asked about the pandemic’s toll on many garment workers in the Asia Pacific, who have been laid off or temporarily without work, both Muller and Fisher said this is due to the industry’s inequitable sharing of value across the supply chain.

Calling it a “tragic direct consequence” of the growth in fast fashion, Fisher said many people have become reliant on the industry’s size and consumption.

Any changes that reduce the demand for new products will likely hurt employment in fibre production and garment manufacturing, he said. Circular models, on the other hand, are likely to create jobs in repair and re-commerce, which should be higher-paying but fewer in number. “Ultimately, a well-designed supply chain based on a circular business model will align the supply chain’s incentives with customer needs and share value more equitably across the supply chain,” Fisher said.

Muller said government leadership is vital, as is companies’ responsibility to respect human rights. Besides protecting the health, safety and livelihoods of their employees, companies should also support the most vulnerable of their customers, workers and small-business partners, she said.

Business and human rights-related legislation has gathered pace in the last five years in places such as the European Union, Muller noted. Investor scrutiny has also risen, driven by increasing evidence that human rights performance has statistically significant effects on investor valuations and margins, she said.

The fashion industry should plan for longer-term recovery and resilience by adopting a “human-centred approach” that is better equipped to distributing wealth equitably—according to where value is created, said Muller.

To do so, suppliers must have a seat at the table alongside fashion brands and retailers.

As H&M’s global environment manager for production Harsha Vardhan told Eco-Business previously: “As a brand, we cannot set up goals and hope that suppliers will achieve it. We have to enable them through investment and innovation. The whole industry has to work together to solve sustainability challenges.”

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