What an Accelerating Secondhand Market Means for Fashion Brands and Retailers
Combined BCG and Vestiaire Collective research sheds light on the trends that matter most to consumers.
The fashion industry is becoming increasingly aware of the environmental impact of its waste problem: 87% of the material used in clothing production is eventually put in landfills or incinerated; less than 1% is recycled into new
While efforts to transition to circular and sustainable business models have long been underway, progress has been slow. Today, circular solutions are far outpaced by the sheer scale of consumption and production. The urgency of the climate crisis and the enormity of the waste problem call for a greater focus on solutions to reduce fashion’s footprint in the near term.
Promoting the reuse of garments is imperative; however, all garments eventually reach an end-of-life moment, when they can no longer be reused. Achieving true circularity in the fashion industry requires advanced recycling solutions to prepare for the end of life of the vast inventory of clothing in circulation that was manufactured using traditional, linear methods and for textiles that are difficult or impossible to recycle using available technologies.
Rather than focusing solely on waste reduction, the fashion industry should adopt a pragmatic approach to circularity and double down on end-of-life recycling solutions, ensuring that textile waste stimulates the production of new garments rather than growth in landfills.
The fashion industry’s overreliance on natural resources for production, coupled with unsustainable waste management and excess production, has had a devastating impact on the environment. (See Exhibit 1.) Repercussions of the industry’s practices include deforestation, loss of biodiversity, water scarcity, soil degradation, chemical pollution, and a massive carbon footprint.
Fashion’s traditional linear “take-make-waste” model contributes to the growing climate crisis by releasing greenhouse gases and using virgin inputs for new production. Circularity offers a promising solution by establishing a closed-loop system that enables textiles to re-enter the value chain, thereby prolonging the value capture of materials.
The circular value chain holistically addresses waste through five interconnected levers. (See Exhibit 2.)
Each step, from material choice to circular design, is a critical enabler for the end-of-life stage, which allows products to be recycled and reused over and over again. For example, technical fibers are often derived from nonrenewable resources and take a long time to decompose in landfills. Increasing the recycled content in technical fibers reduces the demand for virgin resources, conserves energy, and minimizes waste. Given the interdependencies across the value chain, achieving a fully circular value chain will require the maturation of each step, which takes considerable time.
As we continue to make progress in advancing long-term levers like materials innovation and circular design, there is a heightened need to focus on end-of-life circularity solutions to mitigate fashion’s waste crisis in the near term. We must prioritize the development and scaling of advanced recycling systems that can convert multiple sources of textile waste (for example, post-consumer, manufacturing scraps, damaged goods, and excess inventory) into reusable materials, thereby increasing the availability of virgin-equivalent circular inputs for manufacturing.
Before a garment can be recycled, it must go through a series of steps executed by several players working together. Textile waste is collected from consumer and industrial sources; sorted by category, condition, and material composition; and then designated for either reuse or recycling. (See Exhibit 3.)
The process is far from being perfectly linear and straightforward. Instead, it is a complex and intricate web of diverse connections and actors characterized by several complications. Recognizing these complications is the first step toward designing appropriate interventions.
In addition to the complexities that drive inefficiencies in the end-of-life process, there are several gaps where circularity efforts fail and merely postpone landfilling of textile waste. These gaps, discussed below, must be bridged to promote a perpetual cycle of true circularity.
Collection. Significant volumes of reusable and recyclable garments are either not being collected or are being discarded due to barriers that limit consumer engagement and brand adoption of reuse and recycling.
Sorting. Inefficiencies in the sorting market, driven by nascent technologies and inadequate connectivity, inhibit the optimal processing of garments.
Reuse. Reuse models (resale, repair, or rental) without accompanying measures for products whose lifecycle cannot be further extended are incomplete solutions for achieving circularity.
Recycling. Open-loop and closed-loop recycling have significant limitations:
Closed-loop recycling technologies have not achieved scale. Closed-loop recycling, which converts textile waste into fiber that can be used in new material production, has yet to achieve the scale required to process the full spectrum of materials produced and volumes of waste generated. There are two main methods of closed-loop recycling:
While several solutions to advance circularity from an end-of-life perspective exist, their adoption by the fashion industry remains limited. Rather than waiting for the next breakthrough technology or becoming paralyzed in the pursuit of perfection, the industry must seize opportunities to take meaningful action now. To accelerate progress toward a circular future with positive financial returns, the fashion industry must pursue the strategies discussed below.
The limited inclusion of recycled textiles in clothing lines today is driven by the low availability and high price of recycled fibers compared with alternatives. Brands rely on recycled plastic waste for their sustainable collections while waiting for recycled textiles to become economically viable. This is particularly true for recycled polyester, as most brands use recycled plastics (for example, plastic bottles and packaging) from other industries instead of using regenerated polyester from the garments they produce.
This has resulted in a recycling paradox, where textile-recycling technologies are unable to scale without sufficient demand for their output from brands, and brands are hesitant to increase their use of recycled textiles until these technologies become more cost-effective. To break this cycle, brands must increase their use of recycled textiles available today while also investing in the growth of closed-loop textile-recycling technologies to drive demand and achieve economies of scale.
While investment is needed to support early-stage innovations and to scale promising technologies, the latter is harder to achieve given high-risk, capital-intense requirements to scale. There are many promising technologies, particularly in closed-loop recycling, that are ready to be scaled today. However, most players find it challenging to scale their operations beyond a single commercial-scale plant.
Alternative investment models, such as licensing and joint ventures, can reduce upfront capital needs and allow innovators to overcome current funding constraints to scale. Although the tradeoffs between pursuing these alternative investment models and establishing owned-and-operated factories are not unique to textile recycling, prioritizing the former can deliver speed to scale with favorable economic returns.
Scaling recycling without developing the supporting infrastructure and technology for collection and sorting will create a feedstock gap. Closed-loop recyclers have high purity standards and can primarily process mono-materials (for example, pure cotton). Purity constraints, combined with the difficulty in accurately identifying the composition of post-consumer waste, make it a less desirable source of feedstock despite being considerably larger than industrial waste.
As demand for recycled output increases, competition for pure feedstock will also increase, impacting its supply. To address this issue, it is essential to scale closed-loop recycling technologies that can process a wider variety of blended materials and sorting technologies that can accurately identify material composition, making post-consumer waste a more viable source of feedstock.
Individual, small-scale efforts will not achieve the impact required to tackle fashion’s decentralized waste problem. Industry actors have launched initiatives and joined coalitions and alliances to create collective action. Despite the commitment, many players chase communal goals individually, resulting in a sustainability landscape saturated with well-intentioned but fragmented and overlapping initiatives.
Actors must give a higher priority to consolidating efforts at scale than to pursuing individual competitive advantages. For instance, brands can consolidate take-back programs, pool investment in technologies, and share best practices to amplify and accelerate impact. Chemical closed-loop recyclers can also work together to ensure that impurities extracted during processing (that is, materials a particular technology cannot recycle) are passed on to recyclers with suitable technology. For example, a polyester closed-loop recycler can pass on the cotton extracted during processing to a cotton closed-loop recycler.
In searching for opportunities with the highest potential for impact and visibility, brands often overlook short-term prospects that can move the needle. But brands can gradually build end-of-life business models by starting with initiatives that fit into their current ecosystem. One such opportunity could be forging partnerships that unify incentives, remove friction, and create revenue streams. For example, brands can sell their excess inventory directly to closed-loop recyclers, thereby making it easier for recyclers to source feedstock with known material composition.
Brands can further integrate circularity into their core business operations through versatile tools that drive business and social value. For instance, digital IDs enable brands to remain connected to their consumers beyond the point of sale and generate future revenue streams by offering authentication and traceability. Additionally, digital IDs can be used to engage consumers via marketing and storytelling; educate them about the product’s origin, materials, and care; and enable them to eventually resell, repair, or recycle the product.
In addition to reducing waste and emissions, pursuing circularity can yield significant economic value. Circular business models are expected to grow to approximately 23% of the fashion market by 2030, representing an estimated $700 billion
Early movers in fashion circularity recognize that implementing circularity at scale requires an industry-wide transformation. From setting ambitious goals to launching diverse initiatives across the circular value chain, chief executives have demonstrated their commitment to advancing circularity in the fashion industry. Nevertheless, despite the urgency surrounding circularity, many companies struggle to identify where to begin their journey. Pressure from stakeholders for immediate action often leads organizations to replicate frameworks applied by other brands and implement circularity initiatives in an ad hoc, piecemeal manner. However, when it comes to circularity strategies and models, no single approach fits all.
BCG has supported many fashion brands with their circularity agenda, and in our experience, a successful circularity strategy is comprehensive and tailored to the overall business. For example, we applied our integrated circularity framework, called Circelligence, to build and execute a circularity strategy for an athletic- apparel and footwear brand in three phases:
By partnering with the brand from conceptualization to implementation, we accelerated its circularity journey and set it up for success in the long term. The brand embraced circular design principles and scaled up the use of circular inputs in its new products, among other initiatives.
As long as revenues remain inextricably linked to linear production models, mobilizing for change will be difficult. Ultimately, though, if industry interest in circularity fails to translate into impact, the status quo will be disrupted through policy and regulation. Widespread regulation curbing the destruction of textile waste is on the horizon, and those who fail to respond proactively will struggle to survive. It’s time to pivot away from experimenting in circularity to fundamentally rethinking end-of-life strategies.