University of St.Gallen Hochschule für Wirtschafts-, Rechts- und Sozialwissenschaften

Circular Economy Approaches for the Apparel Industry

Master Thesis

Author Lukas Fuchs Rorschacher Strasse 56 9000 St.Gallen Student number: 09-607-763 E-Mail: [email protected]

Advisor Prof. Dr. Thomas Dyllick Institute for Economy and the Environment

Submitted on May 23rd, 2016

Management Summary

With the thesis at hand seven different business models have been investigated on their ability to function as Circular Economy business models in the apparel industry. The different business models have been explained theoretically and exemplified with real business cases from around the world. To complement the conducted primary research, the author has conducted several expert interviews. Then the different models’ ability to contribute to the solution of the waste and pollution difficulties caused by the linear take-make-dispose model employed throughout the industry is assessed. Five categories have been derived to rate the degree of change the business models can add in the development towards a Circular Economy. The results show that only a fully Circular Supply Chain model is able to enhance systemic change at large scale while eliminating waste and pollution through its inherent design.

I Table of Content

Management Summary ...... I Table of Content ...... II List of Abbreviations ...... IV List of Figures ...... V List of Tables ...... VI 1 Introduction ...... 1 1.1 Purpose and Research Question ...... 2 1.2 Method and Build-up ...... 2 2 The Apparel Industry ...... 3 2.1 Fast Fashion ...... 3 2.2 Consumer Behaviour ...... 5 2.3 Clothing aftermath ...... 6 2.3.1 Landfill Fashion ...... 7 2.3.2 Downcycling ...... 8 3 The Circular Economy Idea ...... 9 3.1 Business today ...... 9 3.2 The Circular Economy ...... 10 3.2.1 The Biological Metabolism ...... 11 3.2.2 The Technical metabolism ...... 11 3.2.3 Monstrous Hybrids ...... 12 3.3 Five Business Models after Lacy & Rutqvist ...... 12 3.3.1 Circular Supply Chain: „Right from the start” ...... 13 3.3.2 Recovery and Recycling ...... 13 3.3.3 Product Life Extension ...... 14 3.3.4 Sharing Platform ...... 14 3.3.5 Product as a service (PaaS) ...... 15 3.4 The development of the Circular Economy ...... 16 3.4.1 Inhibitors to the Circular Economy ...... 16 3.4.2 The Fashion Industry: Willingness to change or lack of pressure? ...... 17 3.5 Enablers of the Circular Economy ...... 18 4 Sustainability Challenges in Apparel Production ...... 20 4.1 Apparel Production ...... 22 4.1.1 Sustainability issues in fashion ...... 22 4.1.2 Product Lifecycle Assessment ...... 23 4.1.3 Dyes ...... 24 4.2 Certifications ...... 25 5 Materials ...... 27 5.1 Natural fibres ...... 27 5.1.1 Cotton ...... 27 5.1.2 Alternative Fibres ...... 29 5.2 Synthetic Fibres ...... 30 5.3 Hybrids ...... 31 5.4 Material Recycling ...... 31 5.4.1 Biological Fibres ...... 32 5.4.2 Synthetic Oil based Fibres ...... 32 5.4.3 Collaborative Textile Valley in France ...... 33

II 6 New business Models ...... 34 6.1 Sharing Platforms ...... 34 6.2 Recovery and Recycling ...... 36 6.3 Product Life Extension (PLE) ...... 38 6.4 Product as a service (PaaS) ...... 40 6.4.1 Professional Leasing ...... 40 6.4.2 Varying Leasing Models and Niches ...... 44 6.4.3 Introducing Mud Jeans ...... 45 6.4.4 Peer to Peer Leasing ...... 45 6.5 Closing the Loop ...... 46 6.5.1 Non-Biodegradable Closing the Loop Approaches ...... 47 6.5.2 Biodegradable/Compostable Wear ...... 48 6.5.3 Cradle to Cradle ...... 50 6.5.4 Reverse logistics ...... 51 6.5.5 More scale? Nike joins the Ellen MacArthur CE100 ...... 52 6.6 Slow Fashion ...... 52 6.7 Zero Waste ...... 53 6.8 Merging the concepts ...... 54 6.9 Management Implications ...... 54 7 Consumer Behaviour ...... 56 7.1 Is Sustainability going Mainstream? ...... 56 7.2 Consumer Behaviour ...... 56 7.3 Educating Consumers ...... 57 7.4 Marketing Measures ...... 58 7.4.1 Ad campaigns ...... 59 7.5 Giving change time ...... 59 8 Conclusion ...... 60 Bibliography ...... 62 List of Online References ...... 63 Appendix ...... 81 A. List of companies covered ...... 81 B. Further Figures referred to throughout the thesis ...... 82 C. Expert Interviews ...... 88 D. Declaration of authorship ...... 107

III List of Abbreviations B2B = Business to Business B2C = Business to Customer bn = Billion CAGR = Compound Annual Growth Rate CE = Circular Economy CO2e = Carbon Dioxide emissions CO2-eq = Carbon Dioxide equivalent CHF = Swiss Francs EEB = European Environmental Bureau EST/FAO = Economic and Social Development Department of the Food and Agriculture Organization of the United Nations GBP = Great Britain Pound GDP = Gross Domestic Product GHG = Green House Gas GM = Genetically modified gr = Gram ICAC = International Cotton Advisory Committee Kg = Kilogram KPI = Key Performance Indicator LCS = Life Cycle Approach M&S = Marks & Spencer mil = million MIT = Massachusetts Institute of Technology Mt = Mega Tonnes NGO = Non Governmental Organisation P2P = Peer 2 Peer PLE = Product Life Extension PO4e = Phosphate emission PPP = Public Private Partnership RLMM = Reverse Logistics Maturity Model RRS = Resource Recycling Systems Sb-e = Antimony SME = Small and medium sized enterprises UK = United Kingdom UN = United Nations US = United States of America USD = US Dollar Yoy = year on year Yr = Year ZDZH = Zero Discharge of Hazardous Chemicals

IV List of Figures

Figure 1: Apparel market size projections from 2012 to 2025, by region (in billion (bn) U.S. dollars (USD), Statista, 2016a) ...... 5 Figure 2: Circular Economy System Diagram (Ellen MacArthur Foundation, 2016d) ...... 11 Figure 3: Aggregate Clothing Life Cycle GHG Emissions (BSR, 2009, p.7) ...... 23 Figure 4: Nudie Jeans Repair Shop (Nudie Jeans, 2016b) ...... 39 Figure 5: Overview of Selected Apparel Leasing Companies (own representation) ...... 44 Figure 6: Leasing Scheme (Mud Jeans, 2016d)a ...... 45 Figure 7: Freitag Compostable E550-33 Male Workpant Ochre before-after (Steiner, 2014) ...... 48 Figure 8: Apparel Fibre Consumption developed & developing countries (FAO UN & UCAC, 2013, p.3) ...... 82 Figure 9: Spending on clothes as share of total spending (US) (Bain, 2015) ...... 82 Figure 10: Spending on clothes as share (Bain, 2015) ...... 82 Figure 11: Garments per capita (Bain, 2015) ...... 83 Figure 12: 5 Business Models after Lacy & Rutqvist (2015) ...... 83 Figure 13: Key Players and Drivers for Change (Graff, 2016) ...... 84 Figure 14: World Circular Economy Flow (Haas, 2015) ...... 84 Figure 15: Levi's 501, PLA (Levi's, 2015) ...... 85 Figure 16: Worldwide production volume of chemical and textile fibers from 1975 to 2014 (Statista, 2016c) ...... 85 Figure 17: 5 reasons why not to use cotton (Freitag, 2016e) ...... 86 Figure 18: Organic Cotton Production (Organic World, 2016, p.128) ...... 86 Figure 19: One tranche of Vigga clothes (Vigga, 2016d) ...... 87 Figure 20: Jigsaw slow Fashion advertisement (Chua, 2015) ...... 87 Figure 21: Patagonia Advertisement adressing U.S.A Black Friday madness (Lutz, 2015) ...... 88

V List of Tables

Table 1: Advantages & Disadvantages of Sharing Platforms (own representation) ...... 36 Table 2: Advantages & Disadvantages of Recovery & Recycling (own representation) ...... 38 Table 3: Advantages & Disadvantages of Product Life Extension (own representation) ...... 39 Table 4: Advantages & Disadvantages of Product as a Service (own representation) ...... 46 Table 5: Advantages & Disadvantages of Closing the loop (own representation) ...... 49 Table 6: Advantages & Disadvantages of Cradle to Cradle (own representation) ...... 50 Table 7: Advantages & Disadvantages of Slow Fashion (own representation) ...... 53 Table 8: Advantages & Disadvantages of Zero Waste (own representation) ...... 54

VI 1 Introduction

Simplicissimus by Grimmelshausen was published in 1669, yet it is so relevant and contemporary. The episode of book “Continuatio” chapter 11 (1984) shows us how natural it has been to reuse, recycle, upcycle, compost – simply circulate things - in the history of mankind. A piece of toilet paper tells its journey. Starting off as a single hemp seed it grows into a hemp plant, processed into fibre, and spun into linen. This linen was then used to manufacture a shirt. When the shirt became worn out it was reused as diapers, not once but washed and used many times until it was worn out again. Then it was cut into pieces and used as cloths many times. Some time later it was of no use any more even as a cloth, but treated again and manufactured into paper and used for a book. “Until that I must have gone through 36 different hands”. It was proud of being part of a Vergil (lat. literate) book and used to study a lot. The heirs of the book however had no use for it, tore it apart, used it as wrapping paper, subsequently as toilet paper and later burnt it. The fibre over many years had been used for six stages and many different purposes until it was burnt to ashes and brought back into nature’s cycle as fertiliser. Over the past decades and fuelled by the industrialisation, a linear take-make-dispose economy has evolved that has moved far away from maximising every material’s utility for as long as possible. On the contrary – apparel has become cheap and cycles have become incredibly fast allowing for wasteful consumption patterns. But those benefits come at high costs. Fibre production and manufacturing facilities pollute the environment, large amounts of clothes are under-utilised or even unworn, and substantial cast-off apparel are going to landfill. The negligence of the old circular principles has allowed for such a state of the economy to evolve. However, the system has started to reach its limits. Increasing population and larger middle classes have driven up demand for resources as well as commodity prices, accompanied by greater price-volatility, a development that is expected to continue or even intensify. If companies want to become more independent from virgin resource production, they need to employ a system that is able to turn garment waste into valuable input material for new clothes. Such a system is referred to as the circular economy. This thesis aims at bringing to light opportunities that help transform today’s linear apparel economy towards circularity in a practical way. It is shown how circular economy business models are already competitive and creating new markets. Furthermore, the business models are assessed on their potential contribution for the reduction of pollution and waste generated by the industry today. As Braungart and McDonough put it: “The role of commerce is to stay in business as it transforms” (2002, p.151). This thesis shows both how this transformation is happening in the apparel industry and how companies can utilise the different business models.

1 1.1 Purpose and Research Question

Purpose of this thesis is to investigate the necessity and potential benefits of Circular Economy (CE) business models in the fashion industry. CE business models have grown in prominence only in recent years. Firstly, this thesis aims at introducing companies that have adopted such models and show their success in the market that is still dominated by a linear lock-in. Secondly, the speed at which people consume clothes is getting faster and faster. This leaves the industry with a growing concern over large piles of cast-off garments filling up landfills. Therefore, a special focus will be put on the actual life of garments as well as the waste-problem that is suspected to be getting out of hand. It will shown how CE developments can help solve issues of waste and environmental pollution. The research question reads as follows:

Circular Economy Approaches in the fashion industry. How can companies contribute to solving the problem of shorter product lifecycles and growing amounts of pollution and waste produced by the apparel industry?

1.2 Method and Build-up

Since the concepts are fairly new and relatively little research has been pursued, the author has mainly conducted primary, qualitative research. To obtain the necessary information the author has performed expert interviews, company interviews, and utilized online company information. A number of companies have been analysed in greater depth with regards to their business model.

To start off, the fashion industry will be introduced from a macro perspective showing the industry’s growth in recent years with a focus on the fast fashion development and its implications on consumer behaviour and fashion waste creation. The environmental issues caused be the fashion industry are then brought to light. Subsequently circular economy theory is introduced. The theoretical framework by Lacy and Rutqvist (2015) is merged with McDonough’s & Braungart’s Cradle to Cradle model, and supplemented by fashion specific business models. After the business models are explained a number of enablers and inhibitors to the CE are introduced that explain today’s state of the CE and allow a glimpse into future developments. The theory is then applied onto businesses in the apparel industry. The different business models will then be awarded by a rating system based on five different dimensions. Their possible effect on scaling circularity, reducing pollution in the supply chain, intensifying product use, avoiding or even eliminating apparel waste, and the degree of systemic change with the ultimate goal of indefinite circularity. For each category fulfilled with positive impact, the business model will receive a star.

2 2 The Apparel Industry

"The specificity of the fashion business is that it is subject to trends," says Prof. A. King. "As such it brings suppliers to seasonally offer consumers new alternatives to stimulate their purchases” (2012). The fashion industry has developed into a 3 trillion USD industry and accounts for 2% of the worlds GDP (comp. Fashion United, 2016a). World clothing exports accumulated to 483 Billion USD, accounting for some 2.6 percent of world exports, a 15 percent increase since 2010 (WTO, 2015, p.72). According to the documentary true cost “it is estimated that one in six people alive today work in some part of the global fashion industry, making it the most labour depended industry on earth (Morgan & Ross, 2015, 24:06)”. As of April 2016 two companies, Inditex and Nike, have even reached a market capitalisation of over 100 billion USD. The top 5 comprise of Inditex on the top, followed by Nike, Moët Hennessy Louis Vuitton (LVMH), Hennes & Mauritz (H&M), and TJX Companies (TJX). It is no surprise that two fast fashion companies are ranked in the top five, complemented by Fast Retailing, who owns the global brand Uniqlo, sitting on rank 9. The top 100 companies in market capitalisation make up over one trillion in revenue therefore accounting for more about third of the overall industry’s revenue (comp. Fashion United, 2016a).

2.1 Fast Fashion “Fast fashion poses a threat since its logic is based on copying the designs of high-end producers and quickly diffusing them - sometimes even before the high-end goods, which are based on a complicated and high quality supply chain, are distributed. As such, it mines the overall investment in style by design departments of high end producers” (Chau, 2013). How have those fast fashion companies evolved and what are the consequences for the environment?

“Computer technology transformed the entire process, enabling retailers to design, manufacture and ship products much faster and more efficiently” (Zarroli, 2013). So technology enabled the business model of fast fashion brands like H&M, Zara, Uniqlo, Forever 21 who have moved beyond producing just one collection for every season. New styles are in store every week. "We want to surprise the customers," says H&M’s Margareta van den Bosch. "We want to have something exciting. And if it's all the time hanging the same things there, it is not so exciting" (2013). Zara has famously mastered the model and set industry standards in terms of time to market. Even though different sources talk varying timeframes, the speed at which Zara is able to replenish their shelves is enormous. “They only need one month from starting the concept to having the garments it in their stores” (Zarroli, 2013). “Zara has developed a super responsive supply chain. The company can design, produce, and deliver a new garment and put it on display in its stores

3 worldwide in a mere 15 days” (Ferdows & Lewis & Machuca, 2004). To be able to produce such large quantities and turnarounds, “Zara’s cadre of around 200 designers in Spain come up with around 40,000 new designs each year, of which 12,000 are actually produced” (Siegel, 2011). And Zara`s competitors have reacted accordingly. “At H&M the latest trends can go from a sketch to the rack in as little as three weeks” (Oliver, 2015, 1:48). It is estimated that no less than 52 collections are brought to the customer every year. Or as H&M CEO Persson explains: “We have new garments coming in to the store almost every day. So if you go to an H&M store today and come back two days later you will always find something new” (2015a). Vigga summarises the model appropriately: “Today`s fashion brands no longer launch two times a year, summer and winter collection. They launch pre-spring collection, spring-collection, party collection, classic collection, pre-summer collection, summer collection, high-summer collection, resort collection, co-lab collection, pre-autumn collection, autumn collection, pre-winter collection, winter collection, high-winter collection and Christmas collection – just to mention a few (2016e, 4:55).

Fletcher criticises “fast fashion isn’t really about speed, but greed: selling more, making more money. But fast is not free. Short lead times and cheap clothes are only made possible by exploitation of labour and natural resources. Indeed, it is largely disconnected from reality, with little recognition of poverty wages, forced overtime and climate change” (2007). In 2015 H&M produced over 600 million garments, which represents an increase of over 50 million since 2011 (Whitehead, 2015a). The term describing such types of business is “planned obsolescence”, which is defined as “a business strategy in which the obsolescence of a product is planned and built into it from its conception. This is done so that in future the consumer feels a need to purchase new products and services that the manufacturer brings out as replacements for the old ones” (Hindle, 2009).

With the speed and continuous new choice in stores, in the UK the estimated average lifetime for a garment of clothing is as short as 2.2 years (WRAP, 2015, p.23). Seemingly, the whole model of fast turnover works especially well with the age group of 16-24 year olds of whom 58% stated that they “own unworn items that are no longer my style/taste – compared to 36% overall”. The author wants to emphasize here that an overall percentage of 36 still means that more than one third of the population own unworn garments – a massive inefficiency. The teenage consumption patterns are strongly influenced by Haul videos, whose actors have become YouTube stars. They capture the marriage of technology and shopping (comp. Noll, E., 2010). In those clips, mostly girls, present their shopping pieces influencing the viewers for high paced consumption or disposable fashion who subsequently run off to buy the same pieces. This development has brought skyrocketing growth and is projected to continue to do so - not as much in the western countries, but in the developing world as presented in figure 1. And the textile industry grows

4 with the developing countries: from 2012 to 2013, the industry experienced an 8% growth in world export - more than four times higher the global average growth rate for export (World Trade Organization, 2014). As figure 8 in the appendix shows, the developing countries have already gained significant Figure 1: Apparel market size projections from 2012 to 2025, by region (in billion (bn) U.S. dollars (USD), Statista, 2016a) shares in the world`s fibre consumption, almost 4% only between 2007 and 2010 (EST/FAO UN and ICAC, 2013, p.3).

In the US cheap fashion has allowed the garment share of wallet to decrease dramatically, namely just under 5%, whilst buying more garments, on average 65 pieces per person per year (comp. Bain, 2015a). And even though Fast Fashion brands are selling at low prices and small margins, the volumes pay off – at least for the owners. According to Forbes, H&M chairman Stefan Persson is the wealthiest man in Sweden and number 32 in the world with an estimated net worth of 21.8 billion USD (Forbes, 2016a). He is even topped by Spaniard Amancio Ortega, founder of Inditex, who has taken the worldwide number two spot with an estimated net worth of 69.5 billion USD (Forbes, 2016b). Figures 9, 10, and 11 in the appendix depict those developments in a graphical way.

2.2 Consumer Behaviour “Wanting things makes us happier than having them” a study conducted by Richins (2012) found out. But this kind of happiness is short-lived. As such, "The state of anticipating and desiring a product may be inherently more pleasurable than product ownership itself”. The way our brain rewards shopping - or even just the thought of shopping - seems to favour our inclination to consume. A similar result was found in 2007 by a team of researchers from Stanford. Customers are rewarded with a feeling of pleasure not only from window-shopping but especially while purchasing new things and more specifically in getting a bargain. This phenomenon is called “transactional utility”. According to Dr Tom Meyvis “you see that a lot in clothing” and “part of the joy you get from shopping is not just that you bought something that you really like and you’re going to use, but also that you got a good deal” (2015). “The societal drive to constantly reformulate identity in light of changing fashion trends helps feed psychological insecurity” (Blackburn, 2009, p.370). To feel trendy or in-style and thus secure, people buy the latest trends. This concept is fired up by what Ferdows & Lewis & Machuca call

5 “tantalizing exclusivity” (2004). Tantalising exclusivity means, that e.g. Zara do not produce large quantities of the same, but “small batches of new goods” (2004). Restriction to only a few pieces available creates a sense of urgency. If the customer decides to take some time to think about the purchase, all the pieces might be gone by the time he comes back. “This sounds like a small deal, but effectively it turned fashion retail on its head” (Siegel, 2011). This pressure increases the felt need to buy, creating the term “blink-and-you-miss-it-fashion” (Siegel, 2011). “And (fashion brands, editor’s note) do it because they want to create a consumer craving. An artificial need that manipulated the consumer into their shops very often. This is the essence of today`s buy and throw-away society” (Vigga, 2016d, 4:55). And the model pays off for manufacturers. “We produce a lot of stuff. We convince the consumer that she needs the stuff – she buys the stuff. We produce some more stuff, convince the consumer once again and she buys that, too, and so on and so on and so on. In the end it`s just about: Buy some more stuff” (Vigga, 2016d, 8:00). Made possible by low prices the number of clothes bought and the speed of the purchasing behaviour go up simultaneously. “Whereas a typical retailer could expect its customers to visit four times a year, Zara could bank on an average of 17 visits” (Siegel, 2011). All over the developed world, the same patterns of consumption can be witnessed. Fast fashion businesses enable consumers to live their inclination to consume by offering cheap and stylish fashion items.

2.3 Clothing aftermath The model works. Fast fashion companies are hip, trendy and they earn incredible amounts of money. But one cannot help but starting to think about what happens to all the cast-off, out of style garments? If people buy new clothes all the time, what happens to those already in the closet?

In Germany garment consumption doubles every ten years. Today every German on average buys 60 new pieces a year, adolescencts even more (Greenpeace, 2015a), which accumulates to 4.8 billion pieces a year (Fries, 2016). The amount spent on clothing stays the same implying that the value for money has doubled within ten years (Statista, 2016b). About 40% of the items are worn rarely to never. And since the pace is so high, people need to create space for new stuff, 1 million tonnes of clothing are thrown away, which equals 1.5 billion single pieces of clothing (König, 2015), of which 30% are still perfectly wearable. To make it more graspable, this amount represents a fully equipped clothing line from the earth to the moon (Korolkov, 2016) – and that is Germany alone. UK consumers spend on average 44 million GBP on clothing per year which accounts for 1`700 GBP per household (Wrap, 2010, p.3). Taking into account that the average income per household is 24`000 GBP makes this ratio significant (p.7). “The average UK household owns around £4,000 worth of clothes – and around 30% of clothing in wardrobes has not been worn for at least a year,

6 most commonly because it no longer fits and an estimated £140 million worth (350,000 tonnes) of used clothing goes to landfill in the UK every year.” (Wrap, 2010, p.2). Over 30% of clothing goes to landfill at end-of-life (Wrap, 2015, p.9), which equals 1.8 million tonnes and represents a global footprint of 70kg CO2e per UK household, “which is equivalent to driving an average modern car 6,000 miles” (Wrap, 2010, p.8). The average American throws away roughly 82 lbs of clothing per year which compiles to 11 mil tons U.S.-wide. Women own over USD 550 worth of unworn clothing (Feldman, 2014), which equals 30 percent of the clothes not leaving the closet in the last year. Different country, same story: „The French consume 700.000 tons of textiles, garments, shoes and homeware per year, which corresponds to 11kg per habitant” (Curtain, 2015). 600,000 tonnes of apparel are discarded each year, but only a quarter of that volume is collected (Ellen MacArthur foundation, 2016b.) In the Netherlands 200 mil kg of clothes are thrown away, which is enough to fill the closet of 3 million people (Wearpatch, 2016). Driven to the extreme in Denmark, “young people tend to buy new clothes instead of washing their dirty ones” (Vigga, 2016d, 4:00). All over Europe around 4.3 million tonnes of garments that are thrown away (Behtge, 2015). The results showcased above represent a massive underutilisation resulting in our current consumption patterns and unbelievable amounts of waste. According to Vigga the fashion industry is in a “vicious circle. They know all those facts on fast consumption and play on it with decreasing quality items, since the clothes are not worn many times anyways. So from a business perspective, companies would be wasting money” (2016d, 4:23). Overproduction and the pace at which clothing is bought and discarded produce strange effects. “Only about one-fifth of the clothing donated to charities is directly used or sold in their thrift shops. There are nowhere near enough people in America to absorb the mountains of castoffs, even if they were given away (Luz, 2007)”. This statement even only describes the share of clothes that are gathered. A large amount just goes to landfill creating the term Landfill Fashion. What happens to clothes that are thrown away? About 45% of these textiles are exported and sold in developing countries. Between 1989 and 2003, American exports of used clothing have more than tripled, to nearly 7 billion pounds per year. Used clothing is sold in more than 100 countries (comp. Luz, 2007). According to a University of Cambridge report (2007, Well dressed?) second- hand clothing “is worth USD 1 billion per year. (…) In many African countries it has a significant proportion of the market, up to 30% of the total value of imports and 50% in volume. This raises concerns over second-hand clothes inhibiting the development of local industry”.

2.3.1 Landfill Fashion While many people donate their clothing to charities and consignment shops, fast fashion tends to be so cheaply made that no one wants to buy it. Instead, it gets recycled into industrial rags and

7 insulation (comp. Blue Jeans go green, 2016), or thrown out altogether - generating "landfill fashion”. In Germany the term “Wegwerfkleidung” (Brodde, 2015c) is gaining momentum, which translates into throw-away-clothes and describes the way people treat cheap fashion items. “The cheaper we buy clothes, the easier we throw them away: On average, we wear an evening top 1.7 times before we discard it” (Brodde, 2015b). Vigga is a bit more optimistic “On average, a fashion piece is only worn 7 times” (2016d, 2:00). After their short lifespan, three out of four garments will end up in landfills or be incinerated. Only a quarter will be recycled. (Chung, 2016). “Theses clothes in landfill have on average more than 75% of usage life left” (Vigga, 2016d, 6:35). In the US „It is estimated that 40% of landfills are made up of old textiles used for clothing. As it turns out, when people can wear something one time then throw it out, they do. (…) And it all just sits there, somewhere, on the land, releasing gasses that ruin our planet” (Trepanier, 2015). H&M already sees a business opportunity in recovering some of the USD 71 billion worth of textiles each year (2006, p.91) and has researched that about “95% of this could be reused or recycled” (H&M, 2016a, p.83).

2.3.2 Downcycling Clothes that cannot be sold as second hand are bought by textile recyclers at 5–7 cents per pound. The Trans-America Trading company for example processes more than 12 million pounds of postconsumer textiles per year. About 30% of these textiles are turned into absorbent wiping rags for industrial uses, and another 25–30% are recycled as stuffing for upholstery, insulation, and the manufacture of paper products (comp. Luz, 2007). The problem of downcycling is inherent in its very concept. Fibres are not recovered into their original state, but into materials of lower quality. At some point the fibres cannot be further cascaded and end up in landfill anyways. Downcycling is therefore only a mitigating factor, not a problem solver. As a matter of fact, short use-periods and declining quality increase the share of garments that are not usable as second hand and subsequently have to be downcycled.

The figures presented cry for change. One cannot help but think that the system itself is broken. “Waste is just really a design flaw and we have to be pushing on manufacturers and product designers to design things which are easily recyclable,” said Krebs (2016). To turn things around and not only mitigate but erase the very concept of waste systemic change is needed: “I think the concept of fast-fashion, in terms of creating immediate, on-trend pieces, is here to stay. But I do think the systems and processes that fuel the fast-fashion industry will need to change. If traditional fast-fashion retailers don’t change their methods, it’s going to be difficult for them to continue. Especially as socially conscious shopping brands become more savvy and more accessible” (Willison, 2016). Some brands already play on that thought, such as Finnish label Nurmi who postulate “the fashion system is dead and we need to build a new one” (2016a). 8 3 The Circular Economy Idea

The Circular economy is by no means a new idea. We can go back as far as the 1970s, when Walter Stahel already introduced the term Cradle to Cradle. “Some applications of the circular economy are actually quite old, and we may not realize the number of things we already do that fit into the circular economy. Take, for example, the concepts of re-using, re-marketing and repairing (…). Of course, before eBay, we had flea markets and second-hand clothes shops, but what exists today is a huge global re-marketing platform, which is exactly what we are trying to achieve with the circular economy model” (Stahel, 2013).

3.1 Business today The industrialisation has brought an incredible increase in wealth and living standards to industrialised countries. Many goods have become affordable to the masses and people enjoy the upsides of consumerism. But what happens behind the scenes? Those gains have come at high costs - toxic materials, an abundance of waste, eroding diversity, productivity measured by how few people are working (comp. Braungart & McDonough, 2002, p.18). The term externality describes negative side effects that are not priced into the product. First steps have been taken to make pricing account for externalities as well, like carbon emission trading, yet the overwhelming majority of products today are still “designed on a linear, one-way cradle-to-crave model. Resources are extracted, shaped into products, sold, and eventually disposed in a grave or some kind, usually a landfill or incinerator” (p.27). The Ellen MacArthur foundation calls that a “take, make, dispose approach” (Ellen Macarthur Foundation & McKinsey, 2015). We throw things away when they break. But where is away? “Of course, away does not really exits” (Braungart & McDonough, 2002, p.27). Often what we throw away is even only the tip of the iceberg: “the product itself contains on average only 5 percent of the raw materials involved in the process of making and delivering it” (p.28). To bring those shortcomings into light a lot of NGOs have grown big and become influential. Oftentimes industrialists and environmentalists stand opposite to each other in suspicion of what the other side is planning next. However, there is a solution that could bring opponents together and create a better system. Cradle to Cradle pioneers Braungart and McDonough have called “toward a new industrial revolution” (p.6). When thinking about all the environmental damages it might come surprising that the answer is not less consumption, but “a world of abundance, no limits” (p.15). How would that be possible? Today many companies try to be “less bad” or be more efficient in what they do. But then the question arises: “Why try to optimise the wrong system?” (p.142). Using less input, less energy, less hazardous materials. This is what Braungart and McDonough call eco-efficiency (p. 51). “Eco- efficiency is an outwardly admirable, even-noble concept, but it is no strategy for success over the long term because it does not reach deep enough. Relying on eco-efficiency to save the

9 environment will in fact achieve the opposite; it will let industry finish off everything, quietly, persistently and completely” (p.61/62). So if “doing less bad is no good” (p.45) and reducing the amounts of dangerous toxins and emissions, meaning that there are still dangerous toxins being emitted, is not the solutions – then change must be systemic towards eco-effectiveness (p.68). Starting to do the right things right. Peter Drucker famously said that “once you are doing the right things, then doing them right, with the help of efficiency among other tools, makes perfect sense” (p.76). To achieve eco-effectiveness, designers need to “expand their vision from the primary of a product or system and consider the whole. What are its goals and potential effects, both immediate and wide-ranging, with respect to both time and place? What is the entire system - cultural, commercial, ecological?” (p.82). Right from the start, design has to take into consideration what happens along the supply chain, during the use phase and in the after-life of a product. The current system is becoming more and more efficient at doing the wrong things. It is time for a new one.

3.2 The Circular Economy The idea of cradle to cradle design is leant from nature. It means to “imitate nature’s highly effective cradle-to-cradle system of nutrient flow and metabolism. To eliminate the concept of waste means to design things – product, packaging, and system – from the very beginning on the understanding that waste does not exist” (p.104). Rodrigo from Friends of the Earth postulated that it “needs to go beyond simply improving how we deal with our waste, and instead address the fundamental problem of why we’ve got so much of it in the first place” (2015). Two metabolisms are differentiated. The first one is the biological metabolism in which biological nutrients flow. The second one is the technical metabolism which is a closed loop for technical materials that cannot biodegrade. In the latter technical nutrients continually circulate as valuable inputs for the industry. “In order for these two metabolism to remain healthy, valuable, and successful, great care must be taken to avoid contamination one with the other” (Braungart & McDonough, 2002, p.104), which means that nutrients of the two metabolisms must be kept strictly separated. The nutrients need to stay clean to either be composted or recycled, and products are to be designed for reuse and disassembly. Figure 3 is a comprehensive depiction of the circular flows in a CE. The model itself is not difficult to understand but the implication for businesses as well as the implementation can prove a lot more complex.

10 Figure 2: Circular Economy System Diagram (Ellen MacArthur Foundation, 2016d)

3.2.1 The Biological Metabolism “A biological nutrient is a material or product that is designed to return to the biological cycle – it is literally consumed by microorganisms in the soil and by other animals. Those are what we call products of consumption. The idea is to compose these product of materials that can be tossed on the ground or compost heap to safely biodegrade after use – literally to be consumed” (p.105). The biological metabolism is depicted on the left side of of figure 3. Biological materials are produced, used and then either immediately released back into the cycle as nutrients or cascaded first and then released back later. The power of cascaded use refers to diversifying reuse across the value chain, e.g. clothing used second-hand then as insulation etc. until it is finally being composted. “For biological materials, the essence of value creation lies in the opportunity to extract additional value from products and materials by cascading them through other applications” (Ellen MacArthur Foundation, 2013, p.28)

3.2.2 The Technical metabolism “A technical nutrient is a material of product that is designed to go back into the technical cycle, into the industrial metabolism from which it came” (Braungart & McDonough, 2002, p.109).

11 Figure 3 explains the hierarchy of the circles. The tighter the circle, the less a product has to be changed in reuse, refurbishment, remanufacturing, and recycling. This means the most inner circle (maintenance) is the most powerful, compared to recycling being the least powerful and is referred to as the power of the inner circle (WEF, 2013a, p. 15). Furthermore, the more often the inner cycles can be circled the better since again the product must only be altered accordingly. This is referred to as the power of circling longer. Walter Stahel emphasizes the business perspective: “And if we look at the economics, then it’s very clear that the smallest loops – in other words, reusing, repairing, re-manufacturing and re-marketing goods and components in an industrial context – is where you get the biggest financial benefit, that being the lowest price for the consumer or the highest profit margin for the manufacturer” (Stahel, 2013).

3.2.3 Monstrous Hybrids “It is important to keep the two cycles clean to make reuse of the material safe. As soon as they are contaminated they become monstrous hybrids” (Braungart & McDonough, 2002, p.114). Nutrients that are contaminated cannot be salvaged after their current lives. As we will see later, especially in the fashion industry blended fabrics are unfortunately widespread.

3.3 Five Business Models after Lacy & Rutqvist As recent as 2015 Peter Lacy and Anton Rutqvist have published a book on circular economy business models called waste to wealth in which they introduce five practical business models helping companies become (more) circular. A business model is “the logic of the firm, the way it operates and how it creates value for its stakeholders” (Baden-Fuller, Demil, Lecocq, and MacMillan, 2010). This framework is used by the author to classify concrete and different approaches of (circular) companies and products today. However, one thing must be emphasised beforehand. Although these five models give a comprehensive overview in theory, praxis proves once more to be more complex. Therefore, the author supplemented the framework with business models that are already up and running in the market. These are somewhat specific to the fashion industry and not classifiable by Lacy’s framework. Furthermore, it must be pointed out that many of the businesses are experimenting with or running circular models that cannot be squeezed into just one category. The framework still serves a valuable purpose of giving orientation and enabling a detailed yet structured analysis of the many different approaches out in the market. The framework is depicted in figure 12 in the appendix.

12 3.3.1 Circular Supply Chain: „Right from the start” A fully circular supply chain resembles what is depicted in figure 3, a fully circular model with products that are either compostable in the end or (endlessly) re-usable in the technical cycle. A lot of different tasks are to be mastered along the supply chain. To start with, the significant cost and lead time require determination. Many companies enter the circular model as part of a joint venture with suppliers or customers, sharing the cost and benefits of innovation (comp. Lacy, 2015, p.42). Deep information sharing is required which companies are often uncomfortable with. We will later see that in this case it comes in handy if companies control large parts of their supply chain. The design of the product often requires more people to be involved than in today’s take, make, dispose way of manufacturing since now experts for the afterlife have to be involved to make the product long-lasting and easy to disassemble. Companies need to develop ideas on how to treat end of life products. “To accelerate flows, companies need improve how they trace material flows” (p.41). Maersk line have already implemented a product passport to solve this issue. The passport can be a computer chip that has stored all necessary information on feedstock, dyes, colours etc. that are part of the product and important to know for reuse or disassembly. Especially since garments are often hybrids.

In the end it has to be recognised that “if toxic resources are used to design a more reliable, longer- lasting product, it still isn´t fully circular” (p.36/37), which brings Cradle to Cradle (C2C) into the spotlight. C2C is a special case of “the Circular Supply Chain”. The term was coined already in the 1970s by Walter Stahel (2013), but made famous through Braungart and McDonough (2002). Stahel himself prefers the terms loop economy or CE to C2C “because it is the economics that, for me, are the most important thing” (2013). C2C serves as both a trustee and certification institute with deep industry knowledge (comp. Kälin, 2016). Arguably it is the toughest certification to achieve, because certification is only awarded if a company does not use any harmful substances at all. C2C accompanies businesses that want to get certified during the whole process. Depending on the level of cleanliness different levels of certification are given out. The highest rank, Platinum has not yet been reached at all. Basic, Bronze, Silver, and Gold have been given out many times already (C2C certified, 2016).

3.3.2 Recovery and Recycling It is important to differentiate between Upcycling and Downcycling. Upcycling means converting an old product or material into something of higher valuable (Lacy, 2015, p.52). Downcycling on the contrary diminishes the properties of a material thus making it not suitable to be used in the same circumstances any more.

13 “Recycling & Recovery is very different from recycling. It views waste not as an external problem to be dealt with only by legislation or waste management entities, but as a resource that is fully integrated into the business model” (p.53). Businesses today are not only generating large amounts of waste, but they are also paying a lot for the privilege of disposing it. They may be tossing aside a profitable revenue stream in the form of materials that could, after reprocessing be valuable to another company (p.54). There are two variations of the recovery and recycling models that will later be exemplified. First, recovering end-of-life products to recapture value in closed loops (a company`s own products) or open loops (any company`s products). Second, recovering waste and by-products from a company`s own production process and operations to recapture value. Again, technologies that help tracing materials and identifying their properties are critical. Tracking tool DART is one such solution. It embeds a “product passport” chip that stores information about their contents, including any hazardous or toxic substances (p.60). Companies have to address two challenges: maintaining the quality of resources and keeping ownership rights to high-quality resources. Secondly they need to find ways to control the return flow (e.g. launching product take-back schemes) and to maximize the quality of recovered resources (e.g. such as in-house sorting, reprocessing, and refining technology). The apparel industry produces large amounts of waste. It would uneconomical not to include them as potential feedstock.

3.3.3 Product Life Extension The Product Life Extension (PLE) business model lengthens products` useful lifecycle by generating revenue through longevity instead of volume. It basically means that a product is sold as second hand, or used in any other way until worn out. Manufacturers can use people’s inclination to wanting new things in the form of trade-in or buy back models (see Nudie Jeans later). On the other hand, companies can help their customers extend the product life with repairs or guidelines on how to best care for the product. For that to happen “companies can open field- service through local presence, provide repair, upgrade, refurbishment, and maintenance service. Instead of doing it themselves they can also collaborate with local shops.

3.3.4 Sharing Platform The sharing platform business model facilitates the “renting, sharing, swapping, lending, gifting, or bartering of resources” (Lacy, 2015, p.85). Advances in digital technologies are opening new opportunities to share efficiently at scale (p.86). The desire/action gap should not be underestimated. Perhaps not surprisingly, younger people are the most avid adopters of the model (p.87). Major reasons to opt for sharing: Greater convenience, lower price, and better

14 product or service quality (p.90). Trust is an issue to be take seriously (p.93). Sharing platforms are not as extensively feature in this thesis, since other models are more broadly adopted today.

3.3.5 Product as a service (PaaS) Customers become more of a “user” of the product, as opposed to a “consumer” (Lacy, 2015, p.100). PaaS is most relevant for products with high operating costs or where expensive price tags and long payoff times make it unappealing for customers to own. It is also ideal for short or infrequent use or people with little space or lack of funds for a major purchase. PaaS companies must consider the entire product lifecycle when setting strategy. “Because the provider owns the product and is responsible for lifecycle management costs, strong product performance is critical. Products must be designed for optimal use, maintenance, reuse, remanufacture, and recycling to avoid issues such as fast quality degradation, short lifespan, low utilization rate and low recycling/return which can directly impact the company`s bottom line” (Lacy, 2015, p. 103). Furthermore, companies have to keep in mind, that upfront investment is needed in leasing models. “The capital requirement therefore is higher at the beginning” (Sempels, 2013). ING (2015) has already recognised that „a cash flow based approach to finance rather than an approach based on collateral values” is required. Banks can help with financing such models and have to engage in „exploration and development of leasing arrangements for products with circular potential“.

One of the most attractive provider-benefits of the PaaS model is its impact on customer engagement. The continuous customer engagement often results in greater customer loyalty and retention, resulting in more opportunities to generate revenue from add-on sales and services. Through intense interaction, companies learn about consumer preferences which they can use to developing tailored solutions. Key challenges involve tracking of the leased goods (p.106), managing return channels, product care of returns. Walter Stahel’s performance economy takes the principles of the circular economy to the extreme, in which he envisions that people no longer buy goods but simply services. In a performance economy, incentives for companies automatically change as Stahel explains: “If a company retains the ownership of its goods and materials, it has an incentive not to put any toxic materials into the product. If it has to include them, it will do so in such a way that it’s easy to take them back and separate them out” (2013).

15 3.4 The development of the Circular Economy

3.4.1 Inhibitors to the Circular Economy Lacy explain how the relatively young concepts need to gain scale first: “Most providers can`t reap the benefits until they scale to a level they have yet to reach. Scale economies and production and recovery technologies are still relatively immature” (Lacy, 2015, p.41). Stahel on the other hand argues from a macro perspective: “It’s simply because the problems (…) are mostly problems of industrialized countries. Developing countries have (…) have scarcity of resources, including goods, skills (…). In situations of scarcity, the best strategy that we have is mass production to produce cheap goods to raise the quality of life of the population. In emerging economies, like China, once they have a stock of infrastructure, goods and public services, they can then start to care for this stock and carry out proper operation and maintenance processes. However, if you consider countries in Africa where poverty and scarcity is the rule, the circular economy is not of much use to them. They first have to accumulate wealth before they can build stocks of infrastructure and goods, which they can then maintain and conserve. The traditional, linear concept of the industrial economy still has many advantages for economic actors, and one is that you externalize the cost of risk and waste. Currently there is no legislation that would force a business to internalize these costs” (2013).

The WEF (2013a, pp. 36) explains more specifically why todays economies are still to a large part “trapped in the linear lock-in”. Misaligned incentives make it difficult for a couple of players to change. Customers are used to and often only evaluate the actual cost instead of total cost of ownership, which is a plus for linear-built products as they mostly do not price in externalities. Companies face conflicts of interest and have to change engrained habits. Peter Drucker is famously attributed the saying “culture eats strategy for breakfast”. Today’s company structures have evolved over decades and thus need to adjust greatly for circular business models. One example is the build-up of integrated reverse supply chain meaning that change takes time and commitment. Also, along the existing supply chains suppliers have to adjust if companies decide to make products for disassembly. A company’s incentive systems must also not be underestimated. Today’s key performance indicators and bonus systems are designed to reward throughput, the higher the better – allegedly for both the company and the Managers (comp. Vanthournout, 2016) Serious trust issues must be overcome when competitors have to work together as the Ellen MacArthur Foundation describes: “Collaboration in business can be an intimidating prospect, especially when the collaboration might involve sharing with potential competitors. As the circular economy is a system-wide change (…) pre-competitive collaboration is essential in creating or scaling flows of materials. The economics become more interesting when large

16 volumes of material can be processed, which puts collaboration at the heart of the transition to a circular economy” (2016b). Finally, the CE is in need of enablers to help scale and speed up the transition. And things are already changing. Companies adopt to access-over-ownership models (Mud Jeans), Technology is bringing new solutions (Rent-a-Runway), and politics are starting to engage as they realise the potential benefits. When looking at the apparel industry in particular, “governments are afraid to lose the big corporation should they enforce strict laws” says Alan Roberts. The members of parliament in Bangladesh also have the power to block everything that goes against their interest in the apparel industry (Chalmers, 2013 & Yardley, 2013). However, “Actually the more effective brands out there who turn around their ranges very quickly actually have stayed with their supplier in quite a long time. And they are working with them on a very close basis in order to be more productive” (Roberts, 2014, 8:10). So there appears to be some wiggle room after all and companies might only have to show more determination. But not only in the Eastern World also in Europe the existing frameworks conditions in the current economy are set for linear production. “Basically, policymakers are still living in the industrial economy – in other words, if they want to create jobs or do something to grow the economy, the only thing they can think of is a programme like Cash for Clunkers” (Stahel, 2013). Stahel already provides one part of the solution: “That being said, legal considerations, especially taxing systems have to be reconsidered. “If we had ‘sustainable taxation’, which would be a tax on non-renewable resources (…) and no tax on renewable resources - and work, human labour, is a renewable resource - it would give activities of the circular economy an immediate incentive. The second key aspect of sustainable taxation would be that value added tax (VAT) is only levied on activities where there was actually value added. Since all the activities of a circular economy inherently maintain value, they should not have to pay VAT. This concept has been accepted in principle by the UK treasury and several other European countries, such as in Scandinavia, where there is 25% VAT. By not levying VAT on repairs, re-marketing or re-manufacturing of goods, you would create a clear signal to business that it’s beneficial to get involved in the sustainable activities of the circular economy. Governments should tax things that they want to restrain, and not tax the things they want to promote, such as labour” (Stahel, 2013).

3.4.2 The Fashion Industry: Willingness to change or lack of pressure? According to Lizzi Harrison of Sustain RCA, the fashion industry itself is to blame. “Up to this point, it’s fair to say that most of the fashion industry has been directed by compliance rather than innovation. So they have done what they have had to do rather than taking sustainability as a springboard to do something very exciting.” The problem is that sustainability often is part of the Social Responsibility department and far away from designers. “That presents a real challenge in terms of bringing sustainable innovation into the heart of an organization”. 17 According to D. Freitag (2015), larger companies also have a public relations quandary over sustainability; as soon as they introduce a “sustainable” t-shirt, customers start questioning the sustainability of the rest of their collection. Big brands struggle in telling that story,” he says. “The real innovations are often in small brands, which start completely from scratch and don’t have the burden of a history or a production chain.” While this is certainly true to some extend, Trigema have made different experiences. When asked if customers wonder why Trigema does not apply C2C to the entire product line Mr. Grupp answered: “For us C2C is also important from an image perspective. Customers see that we researching here which shows the customers already the commitment. This can also help the other products. Even a smaller step into the right direction is progress.” Those observations are similar to what H&M have experienced with their campaigns. Despite criticism, the campaigns have been well adopted and customers appreciate the initiative of change. This leaves especially big corporation with one question. Technologies are usable and improving by the minute while pressure from NGOs and customers is evolving. What other choice do they have than starting now?

3.5 Enablers of the Circular Economy The WEF has also identified a list of Enablers that will help the CE gain prominence and acceptance. Consumer preferences are shifting away from ownership which allows Access over ownership/services over product business models gain traction (see Vigga). Next to PaaS models the sharing economy evolves. Forbes estimates the revenue flowing through the share economy directly into people’s wallets will surpass $3.5 billion this year, with growth exceeding 25%, maximizing the utility of assets via renting, lending, swapping, bartering and giving – facilitated by technology (Geron, 2013) (see Vinted). Nike’s Making app serves a perfect example of what technology is capable of. Making helps designers choose materials by providing information regarding environmental impact of the various materials available on “Chemistry, Energy/Greenhouse Gas, Water/Land, and Physical Waste. Materials are rated out of a possible 50 points with higher scores indicating a more positive environmental impact” (Nike, 2016b). The WEF says socio-demographic trends make the benefits easier to capture and associates those largely to urbanisation and young people. This association goes hand in hand with advances in technology create greater opportunities to accelerate the transition (p.25), namely RFID, Internet of everything, and advanced manufacturing and processing technologies. Within those manufacturing and processing technologies 3D printers might be especially interesting “which at the moment work mostly for plastics. (…) then we would really have manufacturing processes that is much more material and energy efficient, and waste free” (2013). Particularly in plastics advanced reverse treatment technologies such as anaerobic digestion and new packaging technologies can be of interest.

18 Finally, Governments and regulators do and are going to play a major part enabling the CE and they are mobilising already (WEF, 2013a, p.16). The U.S. Chamber of Commerce foundation held its 2015 conference under the slogan The Circular Economy. Unleashing New Business Value. (U.S. Chamber Foundation, 2015) and continues this path with its 2016 conference on Better Business, Better World: Mainstreaming the Circular Economy (U.S. Chamber Foundation, 2016). Not only on Federal level also cities are walking the talk. Philadelphia started a Public Private Partnership (PPP) with a textile recycler introducing the curbside textile recycling program (Chua, 2015) to simplify cast-off clothing disposal. In Europe governments and authorities on different levels have started to move towards the CE. The European commission for example promised a tougher enforcement of the CE package (Sanderson, 2016). The package contains a clear EU action plan that encourages far greater resource efficiency much earlier in the production process and includes an eco-design standard encouraging producers to regard after-life ideas already while designing (comp. Anderson, 2016 & comp. European Commission (EC), 2015). Also there are specific goals, of which “a common EU target for recycling 65% of municipal waste by 2030; a common EU target for recycling 75% of packaging waste by 2030; and a binding landfill target to reduce landfill to maximum of 10% of municipal waste by 2030” (EC, 2016) are just three examples that add large scale to recycling programmes. The EU commits to „more than €6bn in funding. By 2030, the Commission expects this to save the EU economy €600bn a year and be a powerful force for job creation” (Anderson, 2016). However, the now pronounced package is a step back from what had previously been a more ambitious package. It had included a ban on sending recyclable materials to landfill by 2025 and a target for EU states to recycle 70% of municipal waste by 2030” (Gould, 2015). Due to lobbying efforts of BusinessEurope who fear for inhibitions of Europe’s competitiveness the package was changed. BusinessEurope explicitly spoke out against target-based approach (2014). Friends of the Earth heavily condemned this decision. “Under the guise of Better Regulation, the Commission has totally undermined claims of ‘ambition’ by watering down binding measures and giving Member States a free pass to shy away from tackling our overconsumption crisis. Compared with the previous one, this package is not Better Regulation but short-termist Bad Regulation” (Bolger, 2016). It could be argued that BusinessEurope’s position severs as a proper example of the battle between the old view, protecting the linear lock in that serves their business perfectly and new circular models. It seems that lobbying efforts have even won against EU authorities. Piotr Barczak, the EEB’s Policy Officer for Waste, commented: “The Commission’s package is promising but still falls short of what is needed” (2016). On a regional level, the cities Prelog (Croatia) and Ljubljana (Slovenia) serve as good examples. Prelog committed in 2016 to move from 50% to 70% recycling by 2020 (Zero Waste Europe, 2016a) and Ljubljana to 78% recycling by 2025 (Zero Waste Europe, 2016b).

19

Also Academia can contribute a great deal. Both Nike and Levi’s have entered a partnership with the Massachusetts Institute of Technology (MIT). Nike’s collaboration is aimed at bringing “innovation in materials to the forefront of the climate conversation and a commitment to reach 100-percent renewable energy in company-owned-and-operated facilities by 2025” (2015). Levi’s partnership is aimed at textiles innovation (Sustainable Brands, 2016).

Of course there are many more change agents, many of them will be presented throughout this thesis. Two change agents have to be named in particular, because they are dedicated to promoting the CE in particular. Cradle to Cradle (C2C) and the Ellen MacArthur foundation. Those two will be featured and cited many times in this thesis. Next to them there are of course companies, Non Governmental Organisations (NGOs), Industry Interest groups, Academics, Fashion Summits, Consultancies and many more. Figure 13 in the appendix gives a more complex overview on the different players that are evolved in driving the CE forward. It also confirms what Rohrer (2016) said in the interview. Retailers or wholesale in general play a major role even though they are not extensively featured in this thesis, at least not as offline retailers.

4 Sustainability Challenges in Apparel Production

"There is something in this for all companies. Only the laggards are the losers. It's a question of being fast or slow" McKinsey's Martin Stuchtey (2015)

Today, to the most extend, we are living in a linear economy. But as Kenneth Boulding (1973) famously said: “Anyone who believes in indefinite growth in anything physical, on a physically finite planet, is either a madman or an economist.” The following data proves him right only 50 years later. “Strong demand for virgin resources and diminishing opportunities for cheap extraction are expected to drive up costs for many virgin resources” (Lacy, 2015, p.41). The WEF has found that “price volatility levels for metals, food, and non-food agricultural output in the first decade of the 21st century were higher than in any single decade in the 20th century (2013, p.13). Commodity prices overall increased by nearly 15% from 2002 to 2010 (p.21). Spiralling prices and volatility are likely to continue in the future (p.22). If prices increase businesses need alternatives. Of course the alternative are circular models. “The CE develops a more predictable, long-term, cost-effective source for the energy or materials it sells to manufacturers” (Lacy, 2015, p.36). Businesses have noticed those developments and when they looked for reason why they happened, “many companies have also begun to notice that this linear system increases their exposure to risks- most notably higher resource prices and supply disruptions” (p.13). For the

20 apparel industry in particular there has been such a sign already. In 2011 the industry was hit by an extraordinary peak in cotton prices because of bad harvests. H&M’s profits shrunk by 30% in one quarter just because of this one single variable (Ward, 2011). With more extreme weather due to climate change, extreme events could become more frequent and threaten harvest more often (National Wildlife Federation, 2016). Had there been recycling schemes in place already, H&M would have certainly been able to cope better. To understand those trends, it is advisable to have a look at macro-developments. According to the United Nations (UN) the world’s population is going to continue to increase. Until 2015 the range lies between 8.5 to 11 billion (bn) people on our planet, with a median at around 9.5 bn (UN, 2016). From the demand side “around 3 billion people are expected to join the ranks of the middle class by 2025 (Dobbs et al., 2011), which will mean a total middle class of five bn (WEF, 2013a). Those people will fire up demand and subsequently increase prices. A study by McKinsey and the Ellen MacArthur foundation has found that “Europe’s economy remains very resource dependent” (2015). Europe’s business need to reduce their dependency otherwise they can be hit hard by price volatility. Many people see this solution in the CE, “proponents of a circular economy argue that it offers Europe a major opportunity to increase resource productivity, decrease resource dependence and waste, and increase employment and growth” (p. 12). If business and politics capture the opportunities this „(...) would allow Europe to grow resource productivity by up to 3 percent annually” generating “a primary-resource benefit of as much as €0.6 trillion per year by 2030 to Europe’s economies. In addition, it would generate €1.2 trillion in nonresource and externality benefits” (p.12). Per capita disposable income could be as much as 11 percentage points higher in the circular scenario (p.14). In the UK, each tonne of clothing that is collected and sorted can generate revenues of US$ 1.975 or a gross profit of US$ 1,295 from reuse opportunities (p.17). For the apparel industry the Ellen Mac Arthur foundation estimates net material cost savings of around US$ 155 bn per year (WEF, 2013a, p.18).

Willi Haas et.al. investigated today’s state of circularity and found that “our estimate shows that while globally roughly 4 gigatonnes per year (Gt/yr) of waste materials are recycled, this flow is of moderate size compared to 62 Gt/yr of processed materials and outputs of 41 Gt/yr. The low degree of circularity has two main reasons: First, 44% of processed materials are used to provide energy and are thus not available for recycling. Second, socioeconomic stocks are still growing at a high rate with net additions to stocks of 17 Gt/yr. From such a system-wide metabolic perspective, the degree of circularity of the global economy measured as the share of actually recycled materials in total processed materials appears to be very low, at 6%” (comp. figure 14 in the appendix). According to Walter Stahel (2016a) the CE “has an equal ability to increase profits and economic competitiveness for organisations, and this potential has largely been underestimated”. Accenture estimates a total possible revenue through CE initiatives of up to USD

21 4.5 trillion in the next 15 years while the Ellen MacArthur foundation & McKinsey estimate that “CE could deliver €1.8 trillion for Europe by 2030” (2015) with “savings in materials alone could exceed $1 trillion a year by 2025” (Nguyen & Stuchtey & Zils, 2014).

4.1 Apparel Production “In the US, the world’s largest apparel market, 97.5 % of clothing purchased is now imported. As recently as 1991, it was just 43.8 %” (Bain, 2015). China is by far the number one producing country of fibres with a yearly output of 47 tonnes followed by the US at 2.9t and India at 2.7t (Engelhardt, 2016). Today, more than 60% of production is carried out in East Asia, while about 60% of consumption occurs in the EU, the US, and Japan with China rapidly becoming a large consumer as well (Gugnami & Mishra, 2012). In Bangladesh, Haiti and Cambodia clothing and textiles account for more than 80% of total exports (Allwood et al., 2006).

This shift in production has brought issues in pollution because developing countries oftentimes neither have strict environmental laws in place nor powerful institutions to reinforce protection measures. In Bangladesh, according to different sources, at least 50% or 60 percent of Members of parliament are in affiliated with the textile industry (Chalmers, 2013 & Yardley, 2013) and have no interest imposing stricter environmental protection laws, which would cut their margins. According to Greenpeace especially people in the producing countries feel the underbelly of increased consumption. Chemicals used in the textile industry increase pollution in those countries. Two-thirds of waters in China are deemed polluted (Greenpeace, 2015b) while in Myanmar one third of the workforce has been injured during working hours (Gardener & Burnley, 2015). A recent study found that in the U.S. 97% of endangered species protected under the Endangered Species Act in are threatened by only 3 Chemicals, malathion, chlorpyrifos, diazinon, which are used by cotton farmers as well (EPA, 2016).

4.1.1 Sustainability issues in fashion

When reading news on environmental issues one cannot help but wonder how this planet could possibly survive such pollution. Next to the waste problem an abundance of environmental pollution occurs along the supply chain. The Danish Fashion Institute found out that “the fashion industry is the second largest polluter in the world…second only to oil” (Ditty, 2015). It is estimated by the World Bank, that 17-20% of industrial water pollution stem from the textile industry (Kant, 2011), while the industry share of water consumption is only 2-3%. Also “25% of chemicals produced worldwide are used for textiles and the industry is often noted as the number two polluter of clean water – after agriculture” (Ditty, 2015). Those figures give an impression why the UNDP had to introduce their development goals in the first place. The fashion industry

22 will especially be effected by quite a few of the 17 goals, namely Clean Water and Sanitation, Sustainable Cities and Communities, Responsible Consumption and Production, Climate Action, Life below Water, Life on Land (2015) and needs to change accordingly by 2030.

4.1.2 Product Lifecycle Assessment US-based manufacturer Levi’s has done pioneering work assessing a garment’s total impact over the complete lifecycle. The first study was conducted in 2007 and found that “the greatest water and energy impact was in two areas: cotton cultivation and consumer care” (Levi’s, 2015). As a consequence, Levi’s have introduced the Levi’s® Water

According to the Business for Social Responsibility (BSR) material production is the second most Greenhouse Gas (GHG) emission intense stage in the garment lifecycle. While synthetic fibres have comparatively high GHG emissions as a result of energy use, Wool has Figure 3: Aggregate Clothing Life Cycle GHG Emissions (BSR, 2009, p.7) comparatively high GHG emissions as a result of methane emissions from sheep. Plant fibres such as cotton or linen have comparatively low GHG emissions from production, with linen having substantially lower production-phase emissions because of its comparatively low need for pesticides, fertilizers and irrigation. (comp. 2009, p.5) “The single most important factor determining a garment’s life cycle GHG emissions is use phase care” (BSR, 2009, p.5). While this might come surprising to many people, the use phase makes up 23 to 40 % (Kruse, 2013) of GHG emissions, due to high energy use in especially ironing and washing, but also drying. H&M says that 26% of the emissions in a garments lifecycle occur during use phase (H&M, 2016, p.83). “Looking at the lifecycle of our products, only about 10% of the climate impacts happen in our own operations. The remaining 90% result from transport (6%), raw material production (12%), fabric production (36%) packaging (5%), garment manufacturing (6%) and when our customers wash and care for their clothes (26%)” (H&M, 2016). Educating customer is therefore very important as explained later.

4.1.3 Dyes For the scope of this thesis it would be too much to go deep into the hazardous and pollutive details of the dyeing industry, which is why in this paragraph the author limits himself to mainly introduce solutions instead. According to Allwood et al. “toxic chemicals are used widely in cotton agriculture and in many manufacturing stages such as pre-treatment, dyeing and printing” (2006). About 0.5% of the toxicity in a T-Shirt come from dying (p.52) with 1.7 mil tonnes of various chemicals used (comp. Chung, S-W, 2016). “During the dyeing process an average t-shirt will use 16-20 litres of water. 80% of the dye is retained by the fabric and the rest is flushed out. The global textile industry discharges 40,000 – 50,000 tons of dye into the water. The majority of garment production and fabric dying now takes place in developing countries. Often health and safety regulations are not well enforced” (Allwood et al., 2006).

As Rohrer (2016) pointed out during the interview, in the dyeing industry small companies are just customers and without leveraging scale it is difficult to influence or pressure the supplying dying companies to change towards eco-friendly dyes. Luckily there are natural solutions in the market already that are non-pollutive and choice is growing. Deepmello for instance have developed a rhubarb based leather tanning system that is free of harmful substances, such as chromium or heavy metals (Deepmello, 2015). Just as recently as of May 2016 DyStar, one of the world`s leading textile dye suppliers has become the first textile dye company to earn the Gold C2C certification (McGregor, 2016). Another German design studio joins the future of dyes. Blond & Bieber is using microalgae as a sustainable fabric dye. Essi Johanna Glomb (2015) says: “The colours for dyes are extremely toxic and really harm the people working with them and also nature. The pigments that we are using are made of microalgae, so that means it’s a totally natural resource. It doesn’t harm nature; we can grow it ourselves, so you don’t have any over-production; and this material is already there and is used.” And there is another intriguing feature for adventurous and curious customers because “colours change dramatically over time, from pink to bright orange, for example, or green to blue” (Moulds, 2015) or when exposed to sunlight (Scheder, 2014). Even though they are far from mass market today, the concept sounds convincing. 24 4.2 Certifications Certifications are necessary because they help customers validate the quality of a fabric. However, there is a sheer jungle of certifiers and some brands even develop their own. Mr. Grupp (2016) told me that once a student interviewed him, who came with a book of over 1000 different certifications just for the apparel industry. This is why Eder-Hansen calls for a “standardization of product transparency disclosures and driving of consolidation of ecolabel(s) for fashion products” (2016). Textile expert and head of technology and environment Nina Bachmann explained during the interview that “it is often the commodity that is certified. But there are a couple of steps after that. The fibre is one thing but afterwards there is also dying, transportation, refinement etc. Those are factors that have a big influence on the complete life cycle assessment next to the feedstock” (Bachmann, 2016). Still certifications play a major role, which is why they are briefly introduced next to other institutions that do not account for as certifiers but whose standards are used and thus have a valid place in the industry.

The Global Organic Textile Standard (GOTS) is recognised as the world's leading processing standard for textiles made from organic fibres. It defines high-level environmental criteria along the entire organic textiles supply chain and requires compliance with social criteria as well” (GOTS, 2016a). To get certified, companies need to fulfil environmental criteria, technical quality and human toxicity criteria, and minimum social criteria. Compared to other labels, GOTS strives to cover the entire processing chain “including spinning, knitting, weaving, wet processing, manufacturing, and trading” (GOTS, 2016b). GOTS offer two different label-grades. A textile product carrying the GOTS label grade ‘organic’ must contain a minimum of 95% certified organic fibres whereas a product with the label grade ‘made with organic’ must contain a minimum of 70% certified organic fibres (GOTS, 2016a). The broad acceptance in the industry has motivated GOTS to move beyond cotton. Even though “GOTS is very focussed on cotton, GOTS 4.0 is also taking synthetic fibres into account, which is new” (Bachmann, 2016).

Oeko-Tex offers several certifications to its customer in the textile industry. It is a union of 16 independent textile research and test institutes with offices worldwide (comp. Oeko-Tex, 2016a). The OEKO-TEX® Standard 100 is an independent testing and certification system for textile raw materials, intermediate and end products at all stages of production. Examples for items eligible for certification: Raw and dyed/finished yarns, raw and dyed/finished fabrics and knits, ready- made articles (all types of clothing, (...)). Testing for harmful substances includes: illegal substances, legally regulated substances known to be harmful (but not legally regulated), chemicals as well as parameters for health care. In their entirety the requirements clearly exceed existing national legislation (comp. Oeko-Tex, 2016b).

25 Made in Green (former Oeko-Tex 100) is an independent textile label for highlighting consumer products and semi-finished products at all levels of the textile chain that are made from materials tested for harmful substances and that have been manufactured by using environmentally friendly processes and under safe and socially responsible working conditions (Oeko-Tex, 2016c).

Better Cotton Initiative is a global network aiming to transform and improve the production of cotton. “BCI brings together farmers, ginners, traders, spinners, mills, cut & sew, manufacturers, retailers, brands and grassroots organisations in a unique global community committed to developing Better Cotton as a sustainable mainstream commodity” (Better Cotton, 2016a). With its 700 members it has he power to change things on a very large scale (Better cotton, 2016b). Better Cotton is disputed though for using GM cotton (Mud Jeans, 2016c).

The Higg Index is a “self-assessment tools that empowers brands, retailers and facilities of all sizes, at every stage in their sustainability journey, to measure their environmental and social and labor impacts and identify areas for improvement” (Apparel Coalition, 2016). “Using the Higg Index is the most adapted and reliable way to measure textile value chains, manage their impact and to finally create a common language on sustainability practice. It had originally been designed for big corporations to use” (Riedel, 2016). From 2016 on for a two-year pilot phase, the Higgs index will be tested for small and medium sized enterprises (SMEs) as well.

Pure Waste is only focussing on the recycling part, but very ambitiously so. “Just as everyone knows that Gore-Tex means an item is waterproof, we want to achieve the same recognition with our Pure Waste label,” says Hannes Bengs (2014). “The consumer will immediately know that an item bearing our label is 100 % recycled. It benefits, rather than harms, the environment.”

NGO Made-by “are not providing a standard per se but compare the environmental impact of different fibres with 6 factors on which they compare. E.g. mechanically recycled polyester gets a better result that chemically recycled polyester” (Bachmann, 2016). They aim at improving the industry through consultancy services with their MODE Tracker, “a holistic, transparent and verified progress tracking tool to support brands & retailers in improving their sustainability performance through measuring and communicating yoy progress” (Made-by, 2016).

26 5 Materials

„Polyester and cotton are the most widely used textile materials but also the most harmful materials to the environment” says Nurmi clothing (2016b). “Cotton and synthetic (non- cellulosic) fibers cover approximately 90% of the world fiber consumption annually” (EST/FAO UN and ICAC, 2013). The amount of fibre consumption has increased with the pace of fashion sales. According to the Food and Agriculture Organization of the United Nations (FAO UN, 2013) and International Cotton Advisory Committee (ICAC) total fibre consumption has increased from 38`889 in 1992 to 69`728 mil tonnes in 2010, which represents a 79% increase in just 18 years (p.2) of which 40% are agriculturally derived and 60% synthetically (Gugnami & Mishra, 2012). The worldwide fibre production has reached 94.9 mil tonnes in 2015, which represent another 40% increase since 2010, while demand has exceeded production with 96.7 mil tonnes. With a world population of 7.3 bil the per capita demand is 13.7 kg (Engelhardt, 2016). According to research by the MIT the global apparel industry is expected to produce more than 400 bil square meters of fabric per year (Kirchain et al., 2015, p.2). This development is expected to continue (Circle Economy, 2015).

5.1 Natural fibres Natural fibres have seen a sharp decrease in 2015 by 13.2% mainly caused by an exceptionally decrease in cotton (Engelhardt, 2016). A Chart on fibre production from 1975 until 2014 can be found in the appendix (figure 16)

5.1.1 Cotton Industrial Cotton is nicknamed a dirty crop. A report for the FAO, UNEP and WHO found that „Cotton uses 22.5% of the world’s insecticides and 10% of all pesticides, on 2.5% of agricultural land” (2013). Estimates of how much water is needed on average to produce 1 kg of virgin cotton range from 13.000 litres of water (Circle Economy, 2016b) to 8’500 litres while 25 mil tonnes are produced every year around the globe (WWF, 2007). Cotton production in 2015 has shrunk by 15.6% yoy (year on year) to 22 mil tonnes while demand has decreased by 2.2% (Engelhardt, 2016). O Ecotextiles roughly assumes that the industry “consumes nearly 1 bil kWh of electricity or 130 mil tonnes of coal, making the apparel industry a significant contributor to global greenhouse emissions” (2009). Even tough a single T-Shirt only has a 2.1kg CO2-eq

(CO2equivalent), the estimated cradle-to-gate impact of cotton in the apparel industry is a significant 107.5 mil tons of CO2-eq. This represents the same climate-related burden as the electricity to power nearly 12% of American homes. If production goes up as scenarios expect,

CO2-eq. could even increase to 160 Mt (Kirchain et al., 2015, p.8). The sheer need for large amounts of water could become a major problem in the industry. According to the World Bank (2016) there

27 will be severe water shortages by 2050, if systems stay unchanged, incidentally in regions where cotton is harvested such as East Asia. The regions that suffer from such shortage could face a decline in GDP of up to 6 %. Cotton is responsible for the release of US$ 2 bil of chemical pesticides each year, within at least US$ 819 are considered toxic enough to be classified as hazardous by the World Health Organisation (WHO). Cotton accounts for 16% of global insecticide releases – more than any other single crop. Almost one kg of hazardous pesticides is applied for every hectare under cotton (Environmental Justice Foundation (EJE), 2007). Chlorpyrifos for example, used in West African cotton, causes brain and foetal damage, impotence and sterility. “Between 1 and 3% of agricultural workers worldwide suffer from acute pesticide poisoning with at least 1 mil requiring hospitalisation each year. (…) These figures equate to between 25 mil and 77 mil agricultural workers worldwide” (Goldman, 2004). Many brands have recognised those issues and joined the roadmap to zero (ZDHC) whose mission is “to advance towards zero discharge of hazardous chemicals in the textile and footwear supply chain and act to improve the environment and people's wellbeing” (ZDHC, 2016). 5 reasons why Freitag pass on cotton can be found in figure 17 in the appendix.

Unfortunately, changing to organic cotton does not seem to fix the problems: “To me for many years, sustainability was organic cotton. But actually sustainable fashion is a lot of other things. Organic cotton for instance is equally water consuming than conventional cotton. Of course less in pesticides. But we have to look in different directions to find sustainable solutions. And there are so many great new fibres out there” (Kruse, 2013). Livia Firth points towards the waste problem. “You can use as much organic cotton as you want. You are still producing a huge pile of rubbish - organic cotton rubbish” (2014). The organic cotton market value increased by 67 % between 2013 and 2014, bringing the estimated value to 15.7 bil USD of which 81% are used for apparel (Organic World, 2016). Although on a 10-year basis, organic cotton production has increased significantly, it had been shrinking massively from its high in 2009 (compare figure 18 in the appendix). According to the 2011 Textile Exchange Organic Cotton Farm & Fiber Report, “approximately 151,079 tons of organic cotton were grown in 2010-2011. Organic cotton now equals 0.7 % of global cotton production (Textile Exchange, 2011) and is expected to continue “to increase but it is a very small part of the world cotton production. By even the most optimistic estimates and projections it is unlikely that organic cotton production will exceed 2-3% of world cotton production (Backburn, 2013, p.235). From a consumer perspective, organic cotton is on the rise. Grupp (2016) revealed in the interview “at the moment customers appreciate organic cotton the most. It is even a decisive selling point”. Kruse supports this thesis. “Organic cotton is kind of like the only concept that has

28 been broadly received” (2013). And not only organic cotton labels like Nudie Jeans have grown bigger in recent years. Also H&M are committed to using more organic cotton, with a lot of potential for further growth because “although H&M is one of the largest buyers of organic cotton, it still only accounts for 13.7% of its total garment production” (Whitehead, 2015). So while organic cotton is a lot more environmentally friendly it is still a thirsty product and Bachmann is expecting a shift towards alternative fibres: “the main focus at the moment is not on cotton but on developing alternative fibres. There are more efforts towards alternative fibres developments, for example cellulose fibre” (2016).

5.1.2 Alternative Fibres The commitment of big companies such as H&M can give alternative fibres a boost through their sheer scale (H&M, 2016b). Cellulose fibres grew strong for the past 7 years but have faced a slight consolidation in 2015 to 6.1 tonnes, dominated by viscose (4.9 tonnes) while wool remained almost unchanged at 1.1 tonnes (Engelhardt, 2016). “Particularly within the last few years, major progress has been made especially in alternative fibres. Cellulose fibres like viscose, lyocell or modal. The feedstock is basically wood. With a chemical process a natural-chemical fibre is produced. Cotton, Hemp, and Flax are natural fibres while cellulose fibres are made from natural feedstock, but are chemical fibres. The cellulose process is pretty energy and chemical intense. But the problem is rather that the feedstock come from illegal deforestation. But there are more and more manufacturers that are producing viscose from certified FSC wood und thus sell a pretty eco-friendly fibre. Moreover, customers appreciate the fibre. For example, modal is very pleasant to wear, a lot more pleasant than polyester and is close to cotton properties or even has some that are better than cotton. I think that this is the path into the future in the area of natural cellulose fibres.” (Bachmann, 2016).

Modal is a fibre whose properties are quite similar to those of cotton. It’s made from cellulose that has been extracted from beech wood. First, beech wood shavings are dissolved in acid and then the cellulose is extracted, processed into a viscous pulp, and spun into threads. Beech trees are self-propagating, which means no planting is required to produce Modal (Freitag, 2016c). Lenzing not only claim that they have “only man-made fibers which are carbon neutral”, but also that they produce a 50% higher yield and consume about 10 to 20 times less water than cotton. Resulting in an “aggregated score of the total environmental impact of Lenzing Modal® is only 3% that of cotton”. Lenzing’s edelweiss technology makes those figures possible and “marks the absolute peak of environmentally responsible manufacturing processes by using only oxygen chemistry starting from the pulp production up to the final fiber” (Lenzing, 2016a).

Lyocell is a fabric made from the fibre of certain trees. Because these trees grow quickly and 29 require little water and few pesticides to thrive, it’s a more sustainable option than something like cotton (comp. H&M, 2016c). Lenzing again have a particularly environmentally friendly product “since the solvent used is recycled by almost 100% in the closed loop process” (Lenzing, 2017b).

Hemp has been “Grown for the past 6,000 years” (Croce, 2016) but faced difficulties for prohibition reasons. Its properties make it a perfect fit for textiles. „Hemp fibers are versatile, easy to care for, and virtually perfect. They’re warm, breathable, and extremely strong, which is why hemp has been embraced by so many cultures for thousands of years. Hemp fibers are extracted from the plant’s bast. The plant thrives in almost any climate, doesn’t need much water or any pesticides and doesn’t deplete agricultural soil” (Freitag, 2016c). For H&M it has become more popular since they managed to make it soft enough (H&M, 2016d).

“Linen (also known as Flax) is the oldest textile fiber in the world. It’s also an economical jack-of- all-trades. The fibers are extracted from the bast. Linen fibers are comfortable to wear thanks to their cooling effect, and they’re extremely durable. Farming flax requires quite a bit of know-how, but the good news is that it doesn’t need a lot of fertilizer or pesticides, or additional irrigation. It grows best in temperate climate zones” (Freitag, 2016c). Flax represents less than 1% of all textile fibres consumed worldwide of which 80% are harvested in Europe (comp. Euroflax, 2016)

On Wool, the LCA introduced by Russell (2009, pp. 79-81) has found that CO2e occur mostly during on farm-production, dyeing, and fabric finishing; fossil fuel usages by far during dyeing, fabric finishing, and in-use stages; water usage during on-farm and in-use stages. Wool actually makes an exception in the use phase as it is almost “self-cleaning”. A woollen suit can be cleaned by just hanging outside saving on water and detergent during the use phase. “Or take it with you into the bathroom, because the steam of your shower will actually clean it” (Kruse, 2013). So especially the resource intense use phase can be mitigated by educating consumers on how to clean their woollen product.

5.2 Synthetic Fibres Synthetic fibres are primarily based on polyester, which is produced from crude oil, a non- renewable resource (Cherrett et. al., 2005). According to the WEF, 20% of crude oil will be made into plastics in 2050 compared to 6% in 2014. “The manufacture of polyester and other synthetic fabrics is an energy-intensive process requiring large amounts of crude oil and releasing emissions including volatile organic compounds, particulate matter, and acid gases such as hydrogen chloride, all of which can cause or aggravate respiratory disease. Volatile monomers, solvents, and other by-products of polyester production are emitted in the wastewater from

30 polyester manufacturing plants. The EPA considers many textile manufacturing facilities to be hazardous waste generators” (Luz, 2007). But natural fibres alone cannot satisfy the hunger of over 70 mil tonnes per annum of textile fibres (Waste2Wear, 2016) which is why synthetic fibres are needed. The amount of energy required to produce one ton of polyester is significantly higher than the required energy to produce one ton of cotton and hemp. The average polyester t-shirt has a global warming impact of 3.8 (knit) to 7.1(woven) kg of CO2e. Polyester fibre production is projected to nearly double by 2030 to about 73 mil tons of which nearly 80% go to textile. The global impact of polyester fabric will grow from roughly 880 bil kg CO2e today to a projected 1.5 trillion kg CO2e by 2030. That means over 706 bil kg of greenhouse gas can be attributed to polyester production for use in textiles in 2015. Compared to a cotton t-shirt, a knit t-shirt emits roughly 20% more greenhouse gas, while a woven shirt emits twice as much (Kirchain et al., 2015, pp.14).

5.3 Hybrids “In Waste2Wear® we not only create products made from 100% recycled polyester, but we also use it in combination with other equally sensible materials (such as eco-friendly cotton, organic cotton, wool or viscose) in order to create a wide range of sustainable fabric options” (Waste2Wear, 2016). With todays technologies, there is no possibility to recycle those Hybrids. Until then, they are lost to the cycle with devastating footprints (comp. Kälin, 2016). Recent developments have raised hope that this problem could be solved.

5.4 Material Recycling Of the 80 bil pieces produced every year “only a quarter will be recycled” (Chung 2016). Today, there is still enormous potential for higher collection rates of garments worldwide. „Globally, the textile collection rates are around 20%, in some EU countries this figure is higher but generally never exceeds 40%” (Circle Economy, 2016a). But before collection rate can be improved, it “is important to develop the technologies and create business models and infrastructure that support the highest value reuse and recycling of textiles” (Helene Smits, 2016). Fibersort is a new technology that enables automatic laser-based separation of textiles based on fibre type (comp. Valvan, 2016). The quality of products cannot yet be maintained at or near virgin level using existing manufacturing and revers-cycle processes. By the sixth cycle, tensile and burst strength have typically dropped by 30% and elasticity by 20%. The situation is similar for cotton, a polymer of cellulose, and many other materials” (WEF, 2013a).

31 5.4.1 Biological Fibres As textile expert Bachmann (2016) explains, cotton products can only contain 20% of post- consumer recycled fibres. The limiting factor is technology. A shredding machine tears the cotton textiles apart and shreds them into fibres. During this process, the cotton fibres are shortened. The shorter the fibre the worse the quality. “When you spin the fibres and the fibres are shorter, more ends are bulging which translates into a raw yarn. Naturally there are shorter and longer fibres in cotton. But when high quality cotton yarns are manufactured then the long fibres are used and the short ones for rawer yarns. In the shredding process the long ones are torn into short fibres. So the shredding process decreases the quality and makes the yarn rawer, which is not appreciated by the customers”. Bachmann doubts that the situation will improve: “As of now I do not think that the process will be further developed, because the main focus at the moment is not on cotton but on alternative fibres. Fuelled by a low cotton price I cannot imagine that from a business perspective people will take the investment to develop process that is able to produce a quality yarn made of 100% recycled cotton”.

5.4.2 Synthetic Oil based Fibres Usually the process starts with PET bottles. There are heaps of plastics to be recycled from the oceans. According to Eriksen et. al. “more than 5 Trillion Plastic Pieces Weighing over 250,000 Tons Afloat at Sea” (2014). That is 13’000 plastic waste particles per km2 (Stock, 2016) and covers an area bigger than India, creating the nick-name seventh continent (Die Welt, 2013). By recycling those bottles a great deal of waste can be saved. In the recycling process bottles are first mechanically shredded, then melted and subsequently spun into yarn. There is a little loss of quality, but theoretically, recycling synthetic PET based polyester is repeatable. Also the textile industry is not in need of high quality recycled polyester. (comp. Bachmann, 2016). Only clear PET bottles are used to make Polyester, because the transparent fibres can be dyed later (comp. National Geographic, 2009). The fashion industry is a good fit as it can handle low-quality plastics for their products. And synthetic fibres have major upsides. “RPET fabric uses 90% less water in making recycled polyester versus virgin polyester and 70% less energy (60% according to Bachmann). Summing up, 1 kg of RPET can keep 60 water bottles out of landfill” (Wear2Waste, 2016). Patagonia has already started as early as 1993 to use this process and have since “eliminated the need of 20.000 barrels of oil”. Also “it causes less air, water and soil contamination compared to using nonrecycled polyester” (Patagonia, 2016d). As of May 2016, Polygenta have claimed to have significantly improved the recycling of PET bottles, with 86% water savings and 75% energy savings compared to today’s state of the art (Mathews, 2016). According to Boing (2016) also two companies from Germany and the US have developed a technology that allows a 100% recycling of PET bottles without any loss of quality. If PET bottle could now be recycled back into PET bottles the fashion industry would need to

32 compete for PET waste. Shredded resin today costs 450€ per tonne, compared to 1000€ per tonne for virgin resin. Now that other players can be interested and the quality increases, the price is likely to go up. Polyester fibres have another serious weakness. Every wash of polyester garments releases little fibres into the water. “With acrylic, more than 3,000 fibers per gr can be released in one wash, one fleece loses almost a million fibers at a time. These plastic particles are broken down even further by the salty seawater that fish mistake for plankton. So, via the food chain, synthetic fibers end up back on our own plates. Nowadays, there is one microplastic particle found in every gram of mussel meat, often from clothing” (Life-mermaids, 2016b). In 2015, there is one tonne of plastic for every three tonnes of fish. If the situation remains unchanged by 2050 they will be level (comp. MacDonald, 2016). The PET recycling solutions has brought along issues that might be even more difficult to solve, because just like PET, those fibres are non-degradable. The life-mermaid project (2016a) is funded with over a million Euros to find solutions together with technology centre LEITAT, supported by G-star (G-Star, 2016). If PET textiles were of single origin the recycling process would theoretically be repeatable. There are many new developments and they are promising (comp. Bachmann, 2016 & National Geographic, 2009). Upon Email request whether progress is made on recycling hybrid products, worn again kindly answered: “As you are aware, we are in development of a chemical recycling technology for textiles. The aim of the technology is to separate and recapture polyester and cotton from pure and blended textiles and feed the outputs from the process back into the beginning of the existing textile supply chain to make fibre, yarn and textiles again and again” (2016). So the technology is not yet there but Worn again sound very optimistic in their answer.

5.4.3 Collaborative Textile Valley in France Cluster-building can often be observed when new developments arise. Be it the Dutch flower cluster, be it Silicon Valley to just name two. In France there might be a recycling cluster on its way. “The Textiles Recycling Valley initiative in Northern France puts interdisciplinary collaboration at the forefront of a drive to dramatically increase collection and reuse of textiles” (Ellen MacArthur foundation, 2016b). The companies involved again show the systemic collaboration that is needed to change on a large scale: “Five organisations form the core partners of the project – cd2e, T2M, UP-tex, Team² and EcoTLC - and each bring different skills or knowledge in convening relevant stakeholders, textile innovation, reverse logistics, materials re-use and economics (Ellen MacArthur Foundation, 2016b). In addition, the valley has also created an innovative Circular textile stock Exchange to connect buyers of secondary raw materials and waste producers for the exchange of end-of-life product (Vallée du Recyclage, 2016).

33 6 New business Models

The business models that are now being introduced are based on theoretical frameworks and have proven dominant during the author’s company research. There is a good chance that in the near future further business model gain popularity that are not even though of today. It will also be shown how companies often do not use just one model but a mix of two or more. To be able to properly judge the models used throughout this thesis a rating system is employed. The following five categories are used for judging the model’s ability to move the business towards circularity. The ability to reach mass markets and thus contribute to scaling circularity; reducing pollution in the supply chain; intensifying product use to tackle the underutilisation of garments today; avoiding or even eliminating apparel waste; and the degree of systemic change with the ultimate goal of indefinite circularity. The rating system is to be interpreted as follows:

One and two stars: Mitigating effects at best. The model is still stuck in a linear lock-in if employed alone. Can be described as an eco efficiency approach. Three Stars: Potential for (in-part) contribution to substantial problem-solving. The model comes closer to systemic change, but lacks important attributes to be judged circular. Four Stars: Huge problem-solving contribution potential, but not inherently circular on its own. Is designed to to the right things, but still lacks an important attribute to be come fully circular Five Stars: Systemic Change with potential to fully solve the pollution and waste crisis on a large scale. A model rewarded with five stars is truly circular, the concept of waste is by design non-existent, products are produced in a clean way.

6.1 Sharing Platforms According to McGlyn in the U.S. alone USD 26 billion worth of products are part of the sharing economy (2015). Globally, more than 1/3 of millennials use asset-sharing services. In a survey conducted by thredUP (comp. 2016) “87% of individuals who bought secondhand clothing online shifted their spending away from off-price retailers. In the same survey, more than 50% of respondents reported making their first secondhand purchase online”. And the development is expected to go up by 6% CAGR until 2015 turning online platforms into valuable business model.

The sharing platform business model facilitates the renting, sharing, swapping, lending, gifting, or bartering of resources (Lacy, 2015, p.85). A study by WRAP UK has found that “around 30% of

34 clothing in the average wardrobe has not been worn for at least a year” (2012, p.2) and that “extending the life of clothing by an extra nine months of active use would reduce carbon, waste and water footprints by around 20-30%” (Wrap, 2012, p.22). “23% of respondents indicated they would be more likely to wear more pre-owned clothes if there was a better choice” (WRAP, p. 26). These developments open the door for second hand markets, but also for product as a service (PaaS) business models with varying focus, both offline and online. Lacy has already observed that “perhaps not surprisingly, younger people are the most avid adopters of the model” (2015, p.87). With that in mind it does not come surprising that 68% of adolescents are repelled by the thought of wearing other people`s clothes as second hand and only 15% use Kleiderkreisel, Germany`s biggest online second hand marketplace (Brodde, 2015a). Flea markets have been around for a long time, but always had a bit of a doggy image. Technology has brought new possibilities and transferred those markets online. While many people shop clothing online at eBay, platforms focussed on selling clothes and accessories have also developed. Vinted, who are firming under different names internationally, have already acquired over 12 million members worldwide and more than 22 million items listed. 90 items are sold per minute which means one item every 49 seconds. You can sell, swap or even gift your clothes to other members. Shipping is usually paid by the seller (Vinted, 2016). Of course there are niches to be found in any industry. Vestiaire Collective for example claims to be “the most stylish global marketplace for pre-owned luxury and designer fashion” (2016). The team check every item and add more than 3.000 pieces every day that is then offered to its 3 million members. Vestiaire basically functions as a verification and security buffer in a peer to peer (P2P) network. sharing platforms help reduce waste in the industry through product life extension. People can sell clothes that are still perfectly wearable instead of throwing them away. Theoretically this cycle is repeatable for as many times until the piece is truly worn out. Even though sharing brings new pollution in form of transportation, WRAP has shown that its ecological cost performs significantly lower than the purchase of new clothes (2012, p.22). Selling clothes on the other hand fuels the cycle of buying new things by bringing more disposable income. It is not far-fetched to assume that a significant portion of the money made from sold clothes is spent on new clothes again. Partly on such platforms again, but surely also for brand new things. Swapping has gained prominence as a free of charge alternative. Australia based clothing exchange has already a large active member base and is very easy to handle. Customers sign up, upload photos of what their swapping-objects and can get started right away (2016a). ThredUp has a slightly different approach, which brought them 3.7 million items of traffic in 2015 (Halzack, 2015). Customers do not have to upload pictures but only a couple of details such as brand or colour. They then are provided with an envelope, send the item to ThredUp who take photos and set a price tag. Once the item is sold, customers can use that money for shopping on ThredUp or

35 cash out. To gain a broad member base, ThredUp incentivises its customers by cashing out items worth less than 60$ and take the sales-risk themselves (ThredUp, 2016b).

- Extension of product life - Pollution through transport - Less waste goes to landfill - Clothes mostly not produced - Potential for Scaling sustainably, pollution not traceable - At the end of cascading, products still go to landfill - Only makes part of the broken system more efficient/No systemic change Table 1: Advantages & Disadvantages of Sharing Platforms (own representation)

6.2 Recovery and Recycling First of all, it must be differentiated between upcycling and downcycling. “Most recycling is actually downcycling; it reduces the quality of a material over time” (Braungart & McDonough, 2002, p.56). Since the quality deteriorates more chemicals have to be added to keep the materials useful (p.57). The biggest problem with recycling lies somewhere else: “The agenda to recycle has superseded other design considerations. Just because a material is recycled does not automatically make it ecologically benign, especially if it was not designed specifically for recycling”. Oftentimes the materials have to be treated with hazardous chemicals or other substances which makes the footprint of recycling a lot worse (comp. p.58). Not only the apparel industry but all other industries produce waste in large quantities. There are numerous examples in which waste is being turned into wealth. Swiss brand Freitag for examples uses old tarpaulin from lorries to create bags since 1993 (Freitag, 2016a). Timberland introduced already in 2008 a special edition shoe “made with crumb rubber from discarded truck and car tire”. Supplied by tyre manufacturer Omni United who have built a line of tires that “could be recycled into Timberland shoes after their journey on the road was complete.” (Timberland, 2016). A whole market for upcycled products has developed, fuelling new business models. Upcycling deluxe for example is a German marketplace that offers anything made from what was once allegedly waste. As of May 2016 they serve over 10.000 customers with more than 1.500 products from over 50 designers and shipping to 35 countries (Upcycling Deluxe, 2016).

The perception of what is possible still varies significantly within the industry depending on how recycling is used. Pre-consumer and post-consumer recycling must be differentiated. Materials that have not been touched by consumers are referred to as pre-consumer recycling, e.g. cutting waste. Finnish label Nurmi have designed fashion made from 100% pre-consumer recycled cotton. They actively looked for deadstock material from the Finnish textile industry and much to their surprise found heaps of unused rolls of fabrics (Nurmi, 2014 &Nurmi 2016c & König, 2015). As leakage is one of the main a problem identified by the WEF (2013a, pp.29) Nurmi tackles an important

36 inefficiency in the supply chain. The creation of clothes made of 100% recycling fibres is a terrific achievement and contributes enormously to the reduction of waste. And the concept is spreading. UK-based Study 34 (2016) for example is following the same approach. Their knitwear is “made from a mix of recycled and leftover yarns” (Zimmer, 2015) however also in the luxury segment.

One single product can contain up to 20% recycled post-consumer natural fibres without any loss of quality or longevity (H&M, 2016, p.92). However, technology is only starting to develop better systems. Nudie approaches the waste problem in a twofold way, recycling or downcyling. Their Recycle Dry Jeans ($215) is „born from old denim that has been cut, mulled down to a pulp, and blended with virgin organic cotton to create a new, slubby denim” (Uncrate, 2016) but only in a limited edition of 500 pairs. Other worn out jeans are made into caps, camper seats, or carpets. 2700 pairs of jeans have been used as input for the seats and the carpets already, which would have otherwise gone to waste (Nudie, 2016). The examples above show that the line between different business models is blurry. Nudie Jeans, Nurmi, Mud Jeans, Patagonia, and many more are already approaching models and solutions that are starting to close the loop. However, they are all relatively small scale and high price which again shows the need for systemic change and large player contribution to scale things up. Luckily more and more brands are signing in. E.g. German sportswear giant Adidas have announced to “a new supply chain for polymer ocean waste that would result in an apparel and a footwear collection made from recycled plastic” (Szmydke, 2016). In performance wear PET recycling is already a given. Nike have recycled more than three billion plastic bottles into recycled polyester for Nike performance products since 2010 (comp. George Ogleby, 2016). But what is the downside of Recovery & Recycling and why a next step needed? Even though in Germany only 2% of gathered clothing becomes waste only more than half gets reused as second hand worldwide, 21% are downcycled into cloths, 23% are used as fuel. Synthetic fibres are downcycled and used in plastics, automobile, engineering, and printing industries (comp. Korolkov, 2016). However as soon as those products are not usable anymore, the downcycled textiles still end up in landfill (comp. Perkins, 2014). Recovery & recycling can only mitigate the issues in fashion and buy some time, but by no means is it the complete answer to the problem.

37 - Extension of product life - Downcycling reduces material - Reduction of waste properties - Reduction of need for virgin materials - Recycling processes often use hazardous - Helps cleaning up PET waste chemicals - Potential for large scales - At the end of cascading, products still go to landfill - Recycling supersedes Circular Design considerations/No systemic solution - Gives customers a sense of limitless consumption w/o consequences - Allegedly destroys local producers in developing countries who cannot compete - Only 1/12 of CO2e saved compared to Product Life extension Table 2: Advantages & Disadvantages of Recovery & Recycling (own representation)

6.3 Product Life Extension (PLE) “Do you have any top tips for caring for jeans? “Put them in the freezer. It’s better for your jeans and you save water” (Van Son, 2016).

“The Product Life-Extension business model lengthens products` useful lifecycle by generating revenue through longevity instead of volume. Manufacturers will need to design a product for a long lifecycle that includes upgrades, add-ons, ultimately take-back” (Lacy, 2016, p.76).

Even H&M, whose major interest is selling much and fast, admit that “using your clothes for as long as you can is, of course, the best option” (2016, p. 92). Wrap delivers the numbers to that claim: “Clothing re-use is far better for the environment than recycling: for every tonne of cotton t-shirt re-used, 12 tonnes of CO2e are saved – compared to less than 1 tonne of CO2e saved by recycling the same quantity” (2012, p.26). There are numerous examples already in the market of companies who encourage their customers keep their clothes longer. Patagonia has a natural interest to provide customers with a repair toolkit for expeditions (Expedition sewing kit) but also encourage them actively to extend the product-life with do-it-yourself guides, “buy less, repair more” (iFixit, 2016). Patagonia give extensive material-detailed explanations and care-guides on how to treat different types of materials to extend product life (Patagonia, 2016a). As of May 1st, 2016, there are 45 guides online on different topics like outerwear, tops, luggage, bottoms, fasteners (Patagonia, 2016b). Patagonia guarantee that their clothes can be repaired – for life. If clothes do break, they assist their customers in any way possible to repair those. If customers have questions, they can just hit up their live chat, which pops up when visiting the repair guide site. Together with their partner, iFixit, they provide customers with the necessary repair material (iFixit, 2016). Should customers not be able to do it themselves, no worries, Patagonia have a repair service. To handle the large

38 amounts coming in, they operate “the largest garment repair facility in North America” in which they employ 45 full-time repair technicians” and trained their retail staff to “handle simple repair jobs”, which enables them to conduct more than 40.000 individual repairs in 2015 (Marcario, 2015). But even when clothes completely break down, Patagonia got it covered. Customers can bring them back to avoid landfill or incineration and Patagonia will take care of it; since 2005 they have recycled 82 tonnes (Patagonia, 2016c). Nudie Jeans follow a slightly different approach. They offer free-of-charge repair service for damaged jeans in their own repair shops, of which they have 20 worldwide today (Nudie Jeans, 2016a). 21.331 pairs of jeans have been repaired in 2015 alone (Nudie Jeans, 2016b). If there is no repair shop around, Nudie send their customers a free-of-charge repair kit, including “2 Denim Patches, 1 Black Denim Patch, 1 Iron Patch, 1 Needle, 1 Spool of Thread, 1 Repair Kit Booklet, 1 Thimble” (Nudie Jeans, Figure 4: Nudie Jeans Repair Shop (Nudie Jeans, 2016b) 2016c). Customers who hand in their old Jeans get a 20% discount for buying a fresh pair. Nudie either recycle the old ones or repair and sell them as second hand (Nudie Jeans, 2016b). Rapanui Clothing have also established a freeposting scheme encouraging customers to return their worn out clothes for free. “You can send back old products for store credit even if they are partly destroyed, if you have lost your receipt (…). If we made it, we'll take it back” (Rapanui, 2016a). But not only manufacturers have recognised a demand for repair services. Jeans repair shops have popped up in any major city, representing a massive opportunity for small repair start-ups. #1 Jeans from Frankfurt/Main stands exemplary for this development. Founded by fashion students who were looking to make some money during their studies, they have been overrun with orders and decided to make a business out of it (#1 Jeans, 2016). Now they contribute to preventing jeans from going to landfill full time.

- Reduction of waste - No systemic change - Encourages product care and long- - Supply Chain pollution not term oriented behaviour through inherently included in the concept customer education - End of Life-solutions not inherently - Saved 12 times as much CO2e when designed in the concept compared to recycling - Potential for large scales Table 3: Advantages & Disadvantages of Product Life Extension (own representation)

39

6.4 Product as a service (PaaS)

“Every product is a service waiting to happen” (Lacy, 2015, p.105) “If we can rent cars, apartments and offices, why not also rent clothes?” (Stahel, 2013) “Designing products as product as a service means designing them to be disassembled” (Braungart & McDonough, 2002, p.114).

6.4.1 Professional Leasing “Finding ways to engage with the customer, offering added services and making the experience as stress-free as possible are big parts of these rental businesses' success” (Fallon, 2016). Leasing is a well-established model in many industries already. Leasing cars or power-tools in construction (Hilti, 2016) has been rapidly adopted by customers. People like to get new things in any part of their lives. “We expect a future where not only cars but a wide range of products will float around on models like this, which will drive down ownership rates and force traditional suppliers to innovate” (Lacy, 2015, p.107). Leasing in clothing is not a new concept per se but in very niche markets. Special occasion leasing is just one example, e.g. tuxedos. Thanks to new technological opportunities, leasing clothes is becoming available for mass market products. „These conditions (fast fashion, editor’s note) create a society of product-consumers, not owners. And there’s a difference. Owners are empowered to take responsibility for their purchases—from proper cleaning to repairing, reusing and sharing. Consumers take, make, dispose and repeat—a pattern that is driving us towards ecological bankruptcy” (Marcario, 2015). While there is a lot of truth in this statement Patagonia`s CEO can be challenged in some parts. There clearly is a problem with ownership and the corresponding responsibility fuelled by the linear model. But there are more ways to the solution than putting the responsibility onto owners. Leasing shifts ownership and responsibility from the consumer to the manufacturer, thus making “customers become more of a user of the product, as opposed to a consumer” (Lacy, 2015 p.100). Rent the Runway for example claim that “by giving people access to remarkable luxury experiences, we’re changing the meaning of ownership” (2016) confirming the aforementioned shift in ownership. So with PaaS models, companies are responsible. While Lacy (2015, p.103) says that “PaaS is most relevant for products with high operating costs or where expensive price tags and long payoff times make it unappealing for customers to own” he also mentions that “the model is ideal for customers who only need to use something a few times or infrequently”. So there are two different kinds of leasing. On one hand, expensive items like high fashion pieces that are only worn at rare occasions. On the other hand, people wear their fast fashion pieces only a couple of times which also makes fast fashion a fit for the model. We can further differentiate between short-, medium-,

40 and long-term leasing. Short term would be a tuxedo for a visit to the opera, medium term would be, say, up to three months (see Vigga), and long term would be more than three months, the model Mud Jeans utilises. The shift in responsibility brings new tasks to the lessor (comp. Lacy, 2015, p. 103). Rent the Runway do not even view themselves as members of the traditional apparel market: “We’re not in the fashion business. We’re in the fashion-technology-engineering-supply-chain-operations- reverse logistics-dry cleaning-analytical business” (Rent the Runway, 2016a). This change in perspective forces companies to find solutions for cast-off clothes. Put simply, lessors have to find end-of-life solutions for their clothes, which will contribute to large-scale solutions to the waste problem. Leasing services bring another major advantage from a circular perspective. When customers own their clothes they are responsible for return of cast-off pieces. This allows for massive amounts of leakage in the system. In a leasing system such leakage is systemically designed out because all clothes are expected after a lease and worn out clothes are culled from the cycle.

Introducing Rent the Runway “’We’re not disrupting an existing market. We’re creating a new one”. A bold statement made by Rent the runway (2016) who arguably are the most famous and biggest online lessor of luxury clothing with around 4 million members already in 2014 (Bassette, 2014). Already in 2014 Rent the Runway was suspected to become a billion-dollar company (Bertoni, 2014). While the model is not circular per se because clothing offered is not necessarily produced in a sustainable let alone circular way, it tackles an important issue in clothing, which is intensity of product use as presented earlier (see WRAP, 2012). Rent the Runway reduces the number of dresses that are hanging unused in wardrobes and increases their utilisation rate, both factors largely contribute to the reduction of waste considering the scale of 4 million members. Rent the Runway is interested in short term high speed turnaround thus only allows “four- or eight-day periods” (Cauthen, 2016). Clever add-ons: Such clothes are only ordered for special occasions and often on short notice. Rent the Runway therefore offer free second size. This makes it a lot less stressful for its customers should the usual size not be the best fit. Customers can also add a second garment altogether (of equal or lesser value) for an additional $32.50, which might be attractive for friends going to the same event together. In general, one rental costs about 10% of the retail price (Fallon, 2014). “The site also has stylists to consult via phone, email or chat to make sure you’re choosing the best look for you. If you want to make this a one-stop-shop, Rent The Runway has beauty, shapewear and accessories to round out your look with one purchase” (Cauthen 2016). Those add-ons are likely to pull customers in this fierce competition. Interestingly, the business case is even further strengthened by the fact, that it also works in recessionary times: “In a recessionary climate, women are much more conscious of price per wear

41 for each item of clothing they own," co-founder Hyman (2014) said. "Launching Rent the Runway during the recession has certainly benefitted us, but we've seen that, even as the economy has gotten stronger, interest in renting the runway has not faded."

Introducing Vigga Vigga has specialised on children`s clothes. Children grow fast and have a high demand of new clothing, it could be argued that the pace is even faster than fast fashion. Fallon (2016) recognises that “another ideal customer base consists of individuals going through temporary stages of rapid size change”. Also families with more than one child might only use their clothes only a few of times. Even though many parents sell the clothes, it takes a lot of time and in the end they are still thrown away. Vigga started out when Vigga Svensson wanted to get stylish but cheap clothes for her kids, which she found impossible to achieve so she decided to do it herself. So she put up a brand, won prices and became a sought after industry expert. Until she realised that “she got it all wrong” (Svensson, 2016a, 2:00). When she asked her followers on Facebook: “how much clothes do you have for your child?” The answers went from 100 to 200 pieces. “And how much of it do you use?” The answer was on average less than 25 pieces.” This equals a maximum utilisation rate of 25 percent but we can safely assume that it lies much lower. Suddenly she understood that her contribution was not the world`s most sustainable kid`s fashion brand but a pile of one million pieces of clothes. She later had to close down her old company katvig, but after a while, she decided that she (again) “wanted to make the world`s most sustainable fashion brand – and this time it should be right” (Svensson, 2016a, 9:55). “Children outgrow eight sizes before their second birthday, which means eight wardrobes” (Svensson, 2016a, 11:05), so parents have to buy new clothes all the time. With Vigga customers sign up and for a monthly subscription fee of 48 Euros and then always get designer`s clothes in the right size for their child. A tranche consists of 20 pieces, which consist of 2 short sleeved shirts, 2 long sleeved shirts, 1 body with long sleeves and short legs, 4 bodies, 1 cardigan, 3 pairs of pants, and 2 baby hats (Vigga, 2016c & figure 19 in the appendix). When the child needs a bigger size, customers return the smaller clothes and get a new collection. Then Vigga inspect the clothes, repair if necessary, wash them at a professional laundry and send the collection to another child. Vigga puts much effort into the quality and “test results show that the clothes can circulate 5-7 times” (Launch, 2016). Vigga products do not contain any hazardous fibres (GOTS certified) and are much more convenient to get.

The key to her success she says is “not to look at the product first, think about how the product is going to be used and then design the product and the service to back it up (13:05). Now everybody benefits. The consumer gets a high quality product at low cost, it is convenient, and “the footprint

42 is reduced by up to 80%” (Svensson, 2016a, 13:40). The Ellen MacArthur foundation (2016a) acknowledges her reduction of textile waste between 70-85%, a huge achievement. Also this model incentivises companies to produce in high quality, because the better the quality the more often the clothes can circulate and hence make higher profits. This makes it no longer a matter of believe, whether “you are an eco-freak or sceptical conservative, this business model makes sense because it gives you a better offer than the traditional way of consuming” (Svensson, 2016a, 14:30). But Vigga do not stop here. When asked about what happens to worn-out pieces, Vigga kindly answered: “We have three stops for clothes that is taken out of circulation: Repair, re- design or last option: recycling” (personal communication, May 6th, 2016). With that information Vigga cannot be classed as a PaaS company any more. They are much more. They also utilise product life extension and recycling, bringing them closer and closer to being a circular company. They are introduced in this section because the leasing model is ground-breaking and the dominating part in both their own display and press coverage. Vigga also sees many opportunities for growth: „Adding more (baby) products in the circular subscription model, like more clothing options, strollers, small bikes, baby cribs etc.” (Ellen Macarthur Foundation, 2016a). According to Svensson „we’d like to eventually be able to offer a full service baby platform based on the subscription model, so you can get everything you need this way” (Svensson, 2016b). On that path she also has to invest a lot into consumer education. “People almost always love the concept, but still a lot of people won’t commit straight away and feel the need to go and check with their partners first. (…) we can only think that because it’s a commitment, rather than a one-off purchase, people feel they might get caught out by hidden costs. It’s a new way of buying after all, so they’re a bit suspicious” (Svensson 2016b). This statement by Circle Economy confirms Svensson’s experiences: “Most of the new business models require a broader consumer mind shift and change in industry practices, resulting in longer lead times towards profitability” (2016c). A nice Vigga add-on could overcome the first step of buying into the model: There is a possibility to order gift-cards for one, three, or five months with which Vigga is probably targeting especially grandparent and godparents (Vigga, 2016b). Once used and experienced the convenience and good looks of the designer pieces, Vigga hope that the donee stay with them. This Business model, she argues, can be scaled and applied onto any product or industry. Other companies have already picked up the idea. Platforms like Vigga can be found in other countries, like Kilenda in Germany who offer different qualities, an organic line amongst others (2016).

While children are a natural fit with the leasing model, grown-ups represent a much larger customer group. Fashion cycles are fast and people constantly want new clothes. So theoretically a leasing model makes sense with all age groups. But does it work in practice? The answer is Mud Jeans. Companies like Rent the Runway are customers to the manufacturers and for the most part

43 still following a linear approach. It could be argued that again they are making the wrong system more efficient by optimising only one dimension. But if the entire life-cycle is to be taken into consideration, the clothes offered still might contain hazardous chemicals, the supply chain remains untransparent as well as the garments’ after-life. Mud Jeans have taken that next step and come as a hybrid business model, which is why the leasing scheme is introduced now followed by the circularity approaches in the ensuing chapter. 6.4.2 Varying Leasing Models and Niches Before Mud Jeans a short look must be taken at different leasing schemes that have evolved already to get an idea on differentiating facets and details that might pull customers. German based Myonbelle for example bring the pace of fast fashion into leasing. With a monthly subscription-fee one Figure 5: Overview of Selected Apparel Leasing Companies (own representation) can order a box of different sizes. The customer can send back the old clothes any time she wants in exchange for a new one. The smallest flat rate, which includes two pieces, costs €39 a month (Myonbelle, 2016). The clue: If a customer likes a piece, she can buy it for up to 70% off the original price (Schauberger, 2016). San Francisco based Le Tote (2016) follows the same approach but bundles more items at a higher price: three garments and two accessories at $59 per month. Nice add-on: “The beauty of Le Tote is that you can simply “heart” an item to add it to your wish list, and in each box you receive, you get at least one hand-chosen item from that wish list, in addition to some items that your Le Tote stylist picked out for you based on your interests” (Cauthen, 2016). There are countless niches to be taken, gwynnie bee (2016) for example tackles oversize women (10-32) while Belly Bump Boutique caters to pregnant women with elegant, special occasion dresses (2016). With a market of 4 million pregnant women in the US, who spend an estimated $1.5 billion on maternity clothing every year (comp. Siska, 2014) this seems to be very promising market. Be Mini Couture is a hybrid in the children’s market. They offer special occasion wear for children and tackle a very narrow niche (Be Mini Couture, 2016).

44 6.4.3 Introducing Mud Jeans Mud Jeans follow a somewhat different model to Vigga and Rent the Runway in terms of setup. Customers have to pay a member fee upfront of 25€ and a monthly subscription charge of 7,50€ with a minimum timeframe of 12 months. The total leasing fee accumulates to 90€. After the leasing period has ended there a three choices. The customer can keep the jeans, Figure 6: Leasing or pay a switching fee of 10€ to get a new Scheme (Mud Jeans, pair of jeans which he then continues to pay 2016d)a a monthly fee of 7,50€ for, or send the old pair back and get a 10€ voucher to be used at any time. The scheme is depicted in figure 6. Until today, some 5000 users have already returned their jeans of which 3000 are now being recycled. Of course revolutionary concepts need adoption times. At the moment 40 percent of the customer lease, while 60 percent purchase. Customers who have leased a jeans seem to like the model, 80 percent opt for extension and take a new pair (The Guardian, 2016). Mud Jeans have also learned that „Close relationships in the value chain means less waste and bring higher margins”. They do not require stores to take any minimum orders but let them stock on demand. In return Mud Jeans receives quick and accurate feedback on how the jeans are perceived and can then work closer with their suppliers towards a demand-based production approach. Bert van Son (2016b) says “that large quantities of newly produced clothes are never worn but are destroyed because of the difficulty in matching supply and demand. Estimated overproduction for regular brands is double than for Mud Jeans”. How mud jeans close the loop continues in the next chapter. How they use that from a marketing perspective is presented in chapter on consumer behaviour.

6.4.4 Peer to Peer Leasing While the models introduced up to now are B2C businesses, meaning professional businesses renting out to customers, Britain based Rentez-vouz follows a peer to peer (P2P) approach. The founder’s vision Fiona Desegni is explicitly focussed on reducing waste: "The core of our proposition is that every time you buy something you have a guilty feeling (...) For us rental is a way to get access without the guilt. (...) we are not against buying we are more against waste" (2014). It started out offline as an “events-based concept” in Paris (Smedley, 2014). A group of 40- 50 people sign up, pay a fee and bring their own clothes, or just come and browse what is offered.

45 Rental cost for pieces is set at 15 percent of the original sales price and goes for one week, of which Rentez-vouz takes 20 percent. Young designers can join those events to present their collection and find new customers. Rentez-vouz takes a slightly higher leasing fee of 30 percent from designer and another 20% from sales should the customer buy the piece later on. Desegni wants to bring the concept online in order to get scale. Just like Vigga Svensson, she touches on the trust issue: "It was our decision to create a community first – for such a new concept you really need the trust of people... they are now becoming our ambassadors." Today Rentez-vouz is online, customers can list and rent other customers clothes as well as lease directly from “talented emerging designers” (Rentez-Vouz, 2016a). Again all parties involved benefit. Customers get access to fashion items at reasonable prices and can also make money with theirs. Young designers can gain prominence while making money. And most importantly, a massive amount of waste is being reduced. Or as Desegni puts it: “The idea is to make this a winning situation for everyone. We don't want to be competitors to fashion brands, we are recycling their products” (2014). Rentez-vouz represents a hybrid model as they allow for both p2p selling and consigning. From experience they claim that consignment delivers the customer 25% more money, but p2p selling is faster.

- Brings systemic change (partly) - Not fully circular on its own - Leakage is avoided by design - Clothing not necessarily produced in - Shift in ownership makes companies a sustainable way responsible for waste - Still often utilises recycling/downcycling - If using sustainable clothes, the model when clothes are worn out comes close to circularity - Reduces the amount of unused clothes - Makes expensive items accessible to larger groups - Repair and PLE are a good fit with PaaS - Niche & Mass market compatible

Table 4: Advantages & Disadvantages of Product as a Service (own representation)

6.5 Closing the Loop

“Textiles are nearly 100% recyclable, nothing in the textile and apparel industry should be wasted” (Blackburn, 2009, p.180). At this stage and without any doubt it can be claimed that the apparel industry has to change. The question is whether the technologies are ready yet and subsequently being utilised. According to Nichelson “Four generations of research and development in textile recycling has led to some impressive technical advances that make the quality of Recover’s upcycled yarn comparable to virgin, at a competitive price and with a fraction of the environmental impact” (2016).

46 There are natural fibre non-biodegradable, synthetic fibre non-biodegradable, and biodegradable approaches. The ultimate goal is to make non-biodegradable fibres endlessly reusable.

6.5.1 Non-Biodegradable Closing the Loop Approaches Continuing with Mud Jeans: “In the meantime some 5.000 users have returned their jeans. We upcycled some 2.000 and put them back on offer as vintage jeans and the first 3.000 denims are going to be recycled back to raw denim so we can make new pairs of jeans” (2016a). Mud Jeans use the recycling process explained earlier. The recycled “denim will be used for the production of our new MUD Jeans, and will be launched this September!” (Mud Jeans, 2016b). Nudie Jeans are one step ahead already. Next to their upcycling efforts, they have already sold a limited edition of a recycled pair of jeans. Although only 500 pairs were produced, they have proven the recyclability and saleability of the concept as early as in 2012 at a very high price of 215$ a pair. They also use the same process (comp. Banning, 2012). Jeans are being torn apart, made into denim pulp, mixed with virgin organic cotton, spun into fibres, and manufactured into a new pair of jeans. Nudie Jeans managed a ratio of 17% recycled and 83% new organic fibres (Milchner, 2013).

These examples show that even relatively small companies can achieve a lot. If big companies join the trend great scale could fire up those developments, which is exactly what H&M are doing. Technology is only starting to develop better systems or as Isaac Nichelson, Chief Sustainability & Marketing Officer, Recover Textiles puts it: “Closed loops in textile industries are closer to reality than many would think. The improving techniques of mechanical recycling and the endorsement of global brands and retailers, that realise the important potential for profit making, push the practices of high value recycling to become the new standard for the textile and fashion sectors” (2016b). Nichelson points towards the decisive factor here, the business case. Now that big corporations have realised that there is money to be made, the model gets traction and scale.

H&M confirm that “one single product can contain up to 20% recycled post-consumer fibres without any loss of quality or longevity” (H&M, 2016a, p.92). Of course 20% post consumer fibre share is not satisfactory, especially when we think of the sheer amount of fashion waste that is sitting there waiting to be recycled, of which most are blended though. But H&M have become more ambitious in their way of communication and have not only offered a USD 1 million reward for best recycling technologies in their efforts to close the loop. “No company, fast-fashion or not, can continue exactly like today. The (prize’s) largest potential lies with finding new technology that means we can recycle the fibers with unchanged quality” (Persson, 2015). They are also actively paving the way in their 2015 annual sustainability report. “We want to move towards a 100% circular business model” (2016a, p.89). The explanation follows suit: “recycled materials

47 in particular have two major benefits – they reduce the need for extracting virgin resources and less waste ends up in landfills. Recycled material still has a lot more potential and currently represents only around 1% of our total material use” (comp. H&M, 2016a, p.93). H&M recognises the challenges that have arisen through its business model and it is impossible to go from zero to one hundred percent over night. “We really want to do whatever we can to make sure our products have more positive impact and less negative impact both socially and environmentally than any of our competitors. You have to work for this, systematically. But then in the long run, the negative impact is really linked to resource use.” (Lampa, 2015). Despite all this criticism, H&M seems to mean business and entered a partnership with the Ellen MacArthur foundation “to further develop towards a circular business model” (H&M, 2016a, p.87). Therefore, H&M have set up the following milestones in their journey to a fully circular company: To start with, H&M want to expand second hand sales, collect more clothes, “Nothing goes to waste” and exceed the use of polyester made from PET bottles. (H&M, 2016a, p.92/93).

The complexity of the supply chain could prove difficult. Kälin (2016) revealed during the interview that companies like Trigema and Wolford have one major advantage. They do not have a scattered supply chain like the bigger companies with their 50-100 suppliers and subcontractors. Therefore, they can implement changes faster and innovate quicker. This brings Zara into focus. Often their business model had been questioned for controlling a lot of its supply chain. „Unlike so many of its peers in retail clothing that rush to outsource, Zara keeps almost half of its production in-house” (Ferdows & Lewis & Machuca, 2004). Zara have good reasons to do so, namely short innovation and lead times thus being very quick to market. If Zara decided to go circular, this control would come in incredibly handy and make it a lot easier for them to implement circular structures.

6.5.2 Biodegradable/Compostable Wear While recycling is one way to close the loop and prevent clothes from going to waste, compostable or biodegradable products are another one, which we will see throughout this chapter.

For Swiss manufacturer Freitag, it all started when they needed work wear for their employees: “It had to be something entirely made in Europe and that’s 100% biodegradable” (Freitag, 2014). “We though that contemporary clothing made from natural fibres would be easy to find in the Figure 7: Freitag Compostable E550-33 Male Workpant Ochre before-after (Steiner, 2014) market. But the opposite was true. We soon

48 realised we had to go the long way if we want to follow our (sustainability, editor’s note) conviction” (Freitag, D., 2014), the result: “Prêt-à-composter” (Freitag, 2016b) a closed loop compostable fabric. Freitag are currently selling a whole collection of denims, shirts, and T-shirts made of its revolutionary “F-abric” (Freitag, 2016b). The Guardian Journalist J. Mould acknowledges that F- abric “takes the circular economy to a whole new level” (2015). It is composed of linen, hemp, and modal and almost 100 percent compostable. It took 5 years of development until Freitag had developed six fabrics with varying compositions of the three materials (Freitag, 2016c). While linen and hemp have been well-used fibres for centuries, modal might be fairly new to a lot of people. According to Freitag, their products completely biodegrade within about three months. Almost everything is biodegradable, even the shirt’s buttons, which are made from vegetable ivory (Van Rooijen, 2014), the labels, and against industry standard the sewing thread. Only the Jeans’ buttons are not biodegradable, yet they are designed to be unscrewed for reuse (the mechanism is already patented (Rohrer, 2016)), nothing goes to waste: „All it takes to let it rot in heaven without leaving residues in a damp, warm compost heap – and a little help from the busy inhabitants of the pile” (Freitag, 2016d). Freitag started completely from scratch. They had to find the fibres, the suppliers, the manufacturers but managed to source everything within a 2500km radius around Zurich. The fibres are harvested in the French Normandy region, spun in Italy and North Africa, woven in Italy and finished in Poland. “Whether for ecological or health reasons, no one likes to wear toxic clothing. That’s why as few chemicals as possible are used during the cultivation and further processing of F-ABRIC, meaning that F-ABRIC corresponds to Product Class I of the Oeko-Tex® Standard – you could even swaddle a baby in it without having to worry at all (Freitag, 2016b). These efforts translate into high prices. Jeans cost 240 Swiss Francs (CHF), Shirts 180 CHF, and T- shirts 80 CHF. They are aware that for the moment they are catering to a small group, maybe only one per mille (Freitag, M., 2014). But there are more and more people who are demanding those products and willing to pay a premium (Freitag, D., 2014). Freitag are hopeful that people’s attitude will change in the coming years. “The first issue was food. You eat it, so if you can afford it you start to really think, ‘what am I eating?’ I think clothing is the next step; you have it on your skin (Freitag, D. 2015)”. - True systemic change on large - Chemicals used in production scale remain untransparent - The concept of waste does not - Hybrid products not yet recyclable exist - Cotton limited to 20% use of post- - If produced accordingly, potentially consumer recycled cotton completely harmless - Polyester fibres are discharged every wash

Table 5: Advantages & Disadvantages of Closing the loop (own representation)

49

6.5.3 Cradle to Cradle Within the field of closing the loop attempts there are different levels of purity. Arguably the purest approach would be going C2C certified. Swiss company Rohner Textiles already achieved amazing results. Rohner has managed to cut down their list of chemicals to eight during their entire production process and the wastewater leaving the factory is tested to be cleaner than the incoming water. Before going C2C they used up to 8000 Chemicals. Kälin admits that it is a long and strenuous road to take. Many companies, even those with a clear inclination for sustainable products are repelled by the challenge (2016). A C2C design has to go through 15 steps. Contemporary industrial design would start at their 10th stage, which exemplifies the extra effort that has to be put into C2C. And dedication is what companies need. Puma tried it before and failed not only because of supply chain complexity but also because of lacking management dedication. Furthermore, C2C is restrictive because many many chemical issues are yet to solve. For example, there are no C2C certified prints available today. Kälin is optimistic that the issues can be solved soon and C2C will be able to offer more and broader choice to the apparel industry. According to Trigema’s Grupp (2016) the abundance of certificates makes it difficult to use C2C on a large scale but a certain and growing group actively seeks such products. There are actually online market places only selling C2C products like cradleution.de or tidtilomtanke.dk. Since Trigema comes from a rich heritage, production facilities are already designed for cotton use which is why their C2C products are as well. The products got awarded with the silver rank after XY years of development. Like Freitag, it took Trigema much convincing with their suppliers “who are never psyched about small quantities” (Grupp, 2016). The Shirts have to be covered with soil and biodegrade almost completely (except for the labels) within nine months. No hazardous chemicals or dyes are used for treatment. Using environmentally friendly dyes limits the current colour range to about 20-25 since Trigema do not remotely want to compromise on quality. Under their brand Trigema Change (Trigema, 2016) T-Shirt, Polo’s, Shirts, Sweatpants, Underwear, and Skirts are sold. The products are also sold through their own retail, but Trigema Change products are exposed in a shop-in-shop style (comp. Grupp, 2016).

- True systemic change - Serious commitment needed, - The concept of waste does not which discourages many exist: compostable or indefinite - Long lead times cycling - Concept not yet well known by - No pollution at all consumers Table 6: Advantages & Disadvantages of Cradle to Cradle (own representation)

50 6.5.4 Reverse logistics A circular model based on recycling is of course in need of reverse logistics. “Developing effective reverse logistics networks is a significant barrier, both for individual companies implementing circular business models, and when stepping back to view the system as a whole” (Egerton-Read, 2016). But according to Zils (2016) “reverse logistics has no other challenges than inbound logistics. What brings the most difficulty is the dark side of the moon effect. Nobody has really been structurally working on the issue yet. Competencies are there but not yet linked properly. So we are talking intelligently linking the established skills.”

Next to companies who collect the clothes themselves like Patagonia, or Mud Jeans there are professional collecting companies. To work together with them makes absolute sense especially for big companies who want to concentrate on their core skills. Reshare for example is a part of the textile sorting project that is developing a commercially feasible sorting technology. In this function, Reshare are responsible for the collection of used clothes, of which they approximately collect 23 million kg annually (Circle Economy, 2016d). I:CO is an even bigger company with „take-back programs with more than 60 retail partners” (I:CO, 2016), amongst them big manufacturers like, H&M, Puma, the North face, American Eagle, Levi’s, Forever 21, and skunkfunk. They collect the garments, organise the transport to the recycling plant and sort the items on a global scale. Through extensive procedures, textiles are sorted using upwards of 400 criteria to allocate as second-hand clothing, reuse as cloth, recycle into fibers and paddings or upcycle into a product of equal or higher quality (Elks, 2014). In the UK, Marks & Spencer (M&S) have teamed up with Oxfam to promote Shwopping. People can give back their old clothes at M&S stores or directly with Oxfam who use the clothes to raise money for a good cause. Since 2012 6.9 million garments have been donated with which Oxfam was able to raise GBP 4.5 million (Oxfam, 2016). With Deutsche Post DHL Group (DPDHL), “who are the world’s leading logistics and mail communications company “(Ellen MacArthur foundation, 2016c) another powerful company has joined the business. “The first reverse logistics solutions are in place, such as DHL ‘Envirosolutions’; a comprehensive service offer which includes global solutions to support customers’ zero waste targets”. DHL have together with the Ellen MacArthur foundation and Cranfield University developed the Reverse Logistics Maturity Model (RLMM) for assessment and improvement of return management for a circular economy. Companies are classes into archetypes that determine the logistics requirements. Then the company’s position in the CE value chain is evaluated to determine the relevant components of reverse logistics (CE100, 2016). This process enables “prototypical approach to understand different requirements and success criteria for reverse logistics, driven by different product types and business models” (DPDHL, 2016).

51 6.5.5 More scale? Nike joins the Ellen MacArthur CE100 As of May 2016, Nike also have joined the CE 100 by the Ellen MacArthur foundation. “As a Global Partner to the Ellen MacArthur Foundation, we are enthusiastic about the opportunity to work with like-minded organizations and accelerate new business models that help us create closed- loop product on the path toward a circular economy” said Hannah Jones, Chief Sustainability (2016). The goal is that “By creating low-impact and regenerative materials, we can continue to move toward a high-performance, closed-loop model that uses reclaimed materials from the start. We envision a transition from linear to circular business models and a world that demands closed- loop products. This will involve up-front product design, with materials reclaimed throughout the manufacturing process and at the end of a product’s life. We are re-imagining waste streams as value streams” (Nike, 2016). And there is light at the end of the tunnel. According to Jonas Eder- Hansen, director at the Danish Fashion institute, “In 2015, some 1.3 million of its clothing were made with closed loop material - more than 300 percent compared to 2014” (2016).

6.6 Slow Fashion At the first sight, slow fashion could be a sub-category of Product Life Extension except it is not. Both models share a few characteristics but they differ in decisive ones. While product life extension deals with end-of-life problems and tries to find ways to prevent a garment from going to waste, slow fashion is designed to stay with its purchaser for a long time from the very intention of making the garment. “Slow fashion is about designing, producing, consuming and living better. Slow fashion is not time-based but quality-based (…). Slow is not the opposite of fast – there is no dualism – but a different approach in which designers, buyers, retailers and consumers are more aware of the impacts of products on workers, communities and ecosystems” (Fletcher, 2007). Fashion Consultant Kate Fletcher introduced Slow Fashion as term only in 2007 (comp. Fletcher 2007 & Fletcher 2010) but it gained prominence rapidly showing that it hit a nerve in the Industry. With slow fashion she actively wants to tackle workers and environmental exploitation. „We can design a different system for ourselves that makes money while respecting the rights of workers and the environment, and produces beautiful and conscientious garments” (2007). Wearing things until they are too broken to still be worn is basically what people have been doing throughout history. Only until fast fashion started to allow people to treat fashion very differently. In slow fashion the clothes are meant to stay with the purchaser a long time as they are designed in a timeless way as Rohrer (2016) said during the interview and not thought to be cascaded trough many stages. Jigsaw have been producing with this credo since 1976: “At Jigsaw we believe that fashion is temporary but style is permanent. Our designs are timeless, independent-minded and fun. We prefer not to slavishly follow fashion trends; instead we cherish the opportunity to make something beautiful, meaningful and lasting that you can wear for years” (2016). Slow

52 Fashion goes much beyond any green movement. "Slow fashion addresses the whole cycle. It's about reconnecting with our clothes, rather than viewing them as quick trends or throwaway items” (Clark, 2012). “Wearing clothes more often and for longer periods is the real alternative to become eco-friendly” (König, 2015) or as legendary fashion designer Vivienne Westwood says: “Buy less, choose well, make it last” (2016). Freitag do not even want to call their products «Mode» (German for fashion). “Fashion is associated with seasonality, short cycles, in & out – that is certainly not our approach. But when it comes to dress nicely and have a contemporary look, then we will not hide” (Freitag, 2014). For that matter, Freitag do not have to go on sales to get rid of their stock as they are not subject to changing styles. “And we absolutely are slow fashion. We do not have seasons. We do not go on sales. We sell it over time anyways” (Rohrer, 2016). „Of course, quality costs more. We will buy fewer products, but higher in value. Slow fashion is a glimpse of a different and more sustainable future in a way that respects workers, environment and consumers” (Fletcher, 2007). One could argue that slow fashion means back to the roots. High quality, timeless garments that the customer wants to keep for a long time. Even though members of the movement do not like to hear it – slow fashion can be seen as a counter movement to fast fashion. Brodde sums it up nicely. “Recycling always is only the third best solution. First choice should be conscious buying behaviour and avoiding waste altogether, followed by longer use periods and repair” (2016d).

- Extremely long product life - Often luxury companies – lack of - Noticeable waste reduction scale - No need for sales periods - Systemic change only partly - High quality - Supply Chain pollution remains unclear - Mind-set of designers often sustainability oriented Table 7: Advantages & Disadvantages of Slow Fashion (own representation)

6.7 Zero Waste

“Fashion is seductive, glamorous, even magical. Yet the industry and the garments it produces are full of inefficiencies” (Rissanen & Mcquillan, 2016)

These inefficiencies are often hidden, whether inadvertently or deliberately, as manufacturing is invisible to almost everyone. Zero waste fashion design addresses inefficiencies in fabric use by reframing fabric waste as an opportunity (Rissanen & Mcquillan, 2016). While this statement is written from a design perspective, and therefore only reflecting a certain proportion of waste, it also perfectly fits into the circular economy perspective.

53 Zero waste and slow fashion often go hand in hand as the manufacturers posses similar mind-sets. Again Zero Waste is not fashion specific, but it is a movement that has gained prominence in the industry. Different sources claim different percentages but it is undoubted that waste occurs during production already. Scanga says that 15% are lost due to design patterns (comp., 2015). According to Vo even between 15% and 30% can be wasted during the cutting process. She has eliminated waste altogether with a unique cutting technique. “Positioning the patterns in this way eliminates wastage, but takes more time” (2016). “When you create a garment in the normal way you can be very creative; you can displace the patterns everywhere and it is easier to get the fit right. But when you work with zero waste patterns, you have to work with the rectangular shape that fits on the fabric so in that sense you are a bit limited but you can work around it.” Nurmi and Study 34 who were introduced earlier are also part of zero waste since they utilise pre-consumer waste. “By using discarded waste as raw material of fabrics we can significantly reduce the environmental impact of the material production” (Nurmi, 2016c & Nurmi, 2014). A glimpse into the future shows that zero waste thinking might be pushed in the near future by 3D printing also in apparel. The new technology would allow for eliminating cutting waste completely.

- Eliminating pre-consumer waste - Post-consumer waste remains - Mind set of designer often unclear sustainability and slow fashion - Lack of systemic change and scale oriented à PLE often included - No control over fabric production, pollution situation unclear. Table 8: Advantages & Disadvantages of Zero Waste (own representation)

6.8 Merging the concepts Now that many different concepts have been introduced, the question is, which one is the one of choice? The answer might be: It is a toolbox. During my research I have come across many inspiring ideas, initiatives, start-ups and concepts. Business people like to think in boxes. Porter`s five forces, BCG`s portfolio Matrix are just two of many examples. But throughout writing this thesis the author has come to realise that this is not how circular models work. The companies under investigation have (intuitively) taken the bits and pieces that serve their model best. Some might think that they are in lessors, but soon come to realise that now they are bearing the responsibility of handling worn out garments and start experimenting with recycling, product life extension, and circularity.

6.9 Management Implications The St.Gallen management model consists, amongst others, of three interconnected spheres, strategy, structure, culture (Dubs, Euler, Rüegg-Stürm, Wyss, 2009). Until now the focus has been laid on strategic opportunities and business models companies can utilise. The author sees a great

54 potential for further research investigating the inner life of companies and how they adopt circular business models from a structural and cultural perspective. A few considerations that have come up in the process of writing the thesis will shortly be touched upon now.

Structure At Freitag, the structure differs greatly from how big companies work. Rohrer explains that Freitag works on project levels. The project teams consist of people from all departments with differing expertise (2016). The author acknowledges that Freitag are a smaller company especially the F-abric team is similar to a Start-up, and departments have not yet historically evolved, but project-based could serve as a model nonetheless. Vanthournout adds another consideration. Larger companies need to educate their designers who are not yet used to working on environmental budget (2016). They have to be trained on fabric properties and other environmental influence the different materials have. They must be given training and other help like Nike has done with its making App. The circular economy department is with the sustainability department at H&M. The examples provided throughout this thesis have shown that a circular economy team cannot be squeezed into one department. Rent-a-Runway describe the business they are in: “We’re not in the fashion business. We’re in the fashion-technology-engineering-supply-chain-operations-reverse logistics-dry cleaning-analytical business” (Rent a runway, 2016a). Earlier it had already been mentioned that KPIs and bonus systems are designed for a maximisation of throughput. If companies decide to opt for a leasing model, these have to be adjusted accordingly since cash flow must now consider longer timeframes.

Culture Many corporations have been doing business the same way for decades, the people have done the same tasks. Now they should suddenly change? Most certainly there is going to be internal resistance that needs to be dealt with again with regards to KPIs and bonus systems. Just as a discussion on LinkedIn between Circular economy professionals shows: “Do we forget the main ingredient of a circular economy? Almost every subject regarding products, design, value added supply chains, assets etc. has been posted in this group. I don't read much about people influences. What about it?” (van Dam, 2016).

55 7 Consumer Behaviour

7.1 Is Sustainability going Mainstream? If sustainability is going mainstream remains disputed. Freitag say that sustainability and eco- friendliness remain in its infancy while Trigema know that only a small portion actively seeks C2C products and organic cotton remains the most appreciated sustainability factor for customers. Many wholesalers back off from selling such brands because they suspect that the rest of the assortment might come under pressure (Van Rooijen, 2014). Others are more positive. Perkins from the C2C institute claims that sustainable clothing needs to lose the Hippie and Granny image and is convinced that it happens right now. "Sustainable apparel is not and cannot be a hemp long skirt or Birkenstock shoes. The idea is that beauty has embedded in it an impact and a story. Designers are looking more and more to make the right choices around materials with a positive supply-chain impact. The luxury market is leading the way with some of these aspirational products that you're seeing" (2016). Lenzing’s Fabrics for example are used by The Gap, Victoria's Secret, Patagonia and Eileen Fisher (comp. Carlson, 2016). Lenzing’s Carey is sure that sustainable clothing is on the rise, "it becomes a total lifestyle. It's not just my weekend wear that is sustainable. Brands offer that whole variety" (2016).

7.2 Consumer Behaviour “I have the power of my purchase and every purchase I make is making a statement” (Julie Gilhart, 2016) "Every time a consumer swipes their credit card they are voting" (Evie Evangelou, 2016)

Customers play a vital part in changing towards a sustainable industry with less waste. In the end the customer can judge with a powerful tool: their money. Of course many parts of the supply chain remain untransparent and customers find it difficult to get the right information or distinguish true sustainability from greenwashing. However, throughout this thesis many serious approaches have been presented and customers do have the power to change current conditions with their purchases. The WEF has found that customers are indeed confused by the abundance of environmental labels and do not trust many companies and their sustainability claims (comp. 2013b, p.5). Furthermore, people believe that environmentally friendly products are more expensive (comp. 2013b, p.6). Marc and Spencer’s Barry highlights that “consumers will only follow us in the journey if they can see the benefits personally (2016, 0:41). But change is on its way anyways. “61% of millennials seek and buy environmentally- friendly products, where possible” (2013b, p.8). A study by BBMG, Globescan, and SustainAbility has found that 65% say they feel “a sense of responsibility to purchase products that are good for the environment and society (2012, p.7)”.

56 Interestingly, people from developing countries are twice as like to purchase good with an environmental benefit that those in developed countries. It could be argued, that those people are closer to the effects of environmental pollution and therefore more sensitive to the effects of their shopping. Two thirds globally are even happy to help companies in developing better products (p.7).

7.3 Educating Consumers Throughout this thesis it occurred many times that a lot of things would be easily achievable if the consumer was better educated since the use phase is very resource intense (comp. Russell, 2009, p.84). Companies need to show their customers that their woollen product can be cleaned by airing it for example – and many are taking initiative. Patagonia started already in 2013: “Extending the life of our garments is the single most important thing we can do to lower our impact on the planet. In keeping our clothes in use longer, we reduce overall consumption. Patagonia’s Worn Wear program was created in 2013 as a way to encourage people to take good care of their gear, washing and repairing as needed. The program aims to keep clothing, regardless of brand, in circulation for as long as possible” says Corey Simpson in a Patagonia Press release (2015). Levi’s have found out when conducting the 501 LCA that Consumers in the US wash their garments every 2.3, in France every 2.5, and in China every 3.9 wears. Washing every 10 wears instead of every 2, washing cold, and line-drying would reduce energy use, climate change impact, and water intake by up to 80%. A lot of energy could be saved by not machine-drying the clothes but air- drying, namely 9%. (Nyman, 2014). Levi’s have started a call to action towards their consumers upon this data with a quiz (Levis, 2016b) and a consumer care-tag (Levi’s, 2014). H&M once again is able to reach a larger scale with their initiative Clevercare, which is an independent homepage dedicated to educating their customers. Clevercare urges customers to wash their clothes less often and at lower temperature, line dry instead of tumble dry, and calls upon them to only iron and dry clean if really necessary. Each category is enriched with more information on the reason why customers should follow the advice (Clevercare, 2016). Technology plays a major role in education. Just as Nike has shown with their making app. Rapanui’s traceability technology enables customers to make more informed purchases by showing interactively how their clothes have been made. “Our traceability maps were among the first to trace the product supply chain right down to the planting of the seed, the fabrics, manufacturing, energy use and transport, as well as mixing in ecolabelling and thinking about post purchase impact. Our vision is traceability from seed to shop. Uniquely we've made these trace maps available for every product we make” (Rapanui, 2016b). It was mentioned earlier that supply chains in apparel are both scattered and untransparent. By unveiling the production process of both fibres and clothes, the company both educates customers and gains credibility.

57 7.4 Marketing Measures “Today, we’re proud to launch a cross-country mission to change people’s relationship with stuff” (Simpson, 2015)

To raise awareness, Patagonia go on what they call “the Worn Wear mobile tour, kicking off April 2 (2016) in Ventura, California, and ending May 12 in Boston”, which they call „our attempt to encourage customers to make their clothes last a lifetime” (Simpson, 2015). Mud Jeans follow a similar approach: To raise awareness Mud Jeans also goes on a tour, from Amsterdam to Valencia. “On Sunday May first from 15 to 18pm there’s a Bon Voyage event at the pop up restaurant Gustafson on the Westergas site in Amsterdam during the Sunday Market. Anyone can bring in their old pair of jeans for recycling in exchange for a free drink. Once the Mud Jeans Recycle Tour gets on their way they’ll be heading various activities, as a call to action on the importance of a trash free sustainable world, some activities are; a ‘close the loop’ tips & tricks at Harvest Club in Antwerp, a presentation at the university of La Rochelle, a beach clean up in Biarritz” (Mud Jeans, 2016). Viral marketing is not only cheaper but gives vital customer insight. “The close relationships they have with their leasers and bloggers has given Mud Jeans invaluable customer insight. Mud Jeans learnt from their followers that they are a popular brand amongst vegans as their jeans have no leather in them” (The Guardian, 2016).

To tackle the important age group of 16-24 years old H&M teamed up with musician M.I.A. (2016) to address the issues of rewear. M.I.A. is perceived as an activist for good causes with young people, especially since the release of her song “borders” in which she thematises the current (as of 2015) refugee crisis. With this song H&M aims to raise awareness for its world recycling week, which goes from April 18th until April 24th 2016, an attempt to collect 1000 tonnes of unused clothing for recycling causes. To incentivise people H&M gives out vouchers for those who bring back their old clothes. (H&M, 2016e). The clip has been received controversial with industry experts accusing H&M of once again green washing (Siegel, 2016a) and admitting “distaste” (Siegel, 2016b) on the programme. Journalist Michael Pilz calls “an old capitalist joke” (2016). Marc Bain points out that it would take H&M 12 years to recycle 1000 tonnes and questions the relation of the amount of clothing recycled. H&M only collects 1000 tonnes once a year but sell 1000 tonnes of clothes “in a matter of days”, making their recycling efforts a fairly small fraction their overall yearly output (2016b). Kirsten Brodde, textile expert at Greenpeace, calls H&Ms effort “an illusion. The corporation operates recycling on test tube scale but creates the illusion of big quantities. Only one percent of the collected clothes could really be made into new fibres” (2016d). Kyle Stock acknowledges “brilliant piece of green marketing” and argues that “the company’s number-crunchers deserve some credit, too; they have carefully constructed the program in a way that makes it hard for H&M to lose” (Stock, 2013) Chung calls it an “illusion” of 58 what true sustainability is, as only one per cent of collected clothing can be used as recycled fibres (2016).

7.4.1 Ad campaigns A powerful example is Jigsaw’s Not for landfill campaign who want to educate the customers on longevity of their clothes with an ad campaign that mixed old clothes with new clothes, displaying the year of manufacture, e.g.: “Knit: 2015, Shirt 1990” (comp. figure 20 (appendix), Chua, 2015). “We wanted this campaign to build on the success of our ‘Style & Truth’ platform by celebrating the truth that Jigsaw clothes last beautifully and are still as wearable today as they were the day they were bought. We design and create products for life, and that is reflected by the number our customers who still wear vintage Jigsaw clothing with pride - 30 years later” said Jigsaw CEO Ruis (2015). To contradict black Friday, which quintessentially displays today`s shopping madness, Patagonia published an ad saying “Don`t Buy This Jacket” (Patagonia, 2016d) to wake customer up (figure 21, appendix).

7.5 Giving change time Freitag are hopeful that people’s attitude will change in the coming years: “The first issue was food. You eat it, so if you can afford it you start to really think, ‘what am I eating?’ I think clothing is the next step; you have it on your skin” (Freitag, D. 2015). To change on a larger scale, he actually hopes for other companies to join in instead of fearing their competition: “If we have more materials available; if we have more companies which have standards that mean we are able to work with them, then that is actually a goal for me. I hope that we are getting out of the niche”. On a similar note, Grupp explained that customers need to adjust to compostable clothes. Some were really frightened that their clothes would start rotting in the closet if left untouched for a while (2016).

59 8 Conclusion

Should manufacturers of existing products feel guilty about their complicity in this heretofore destructive agenda? Yes. No. I doesn’t matter. Negligence is descried as doing the same thing over and over even though you know it is dangerous, stupid, or wrong. Now that we know it’s time for a change. Negligence starts tomorrow (Braungart & McDonough, 2002, p.117).

The issues in apparel production are manifold as they are known and accepted widely. Pollutive production, energy-intense usage habits of consumers, fast replenishment and subsequently large amounts of waste that cannot be reused and end up in landfill, the system locked in a linear take- make-dispose economy. But companies are also threatened by unstable and rising commodity prices that pose serious risks on the bottom line. This thesis has introduced the theoretical background to solving these issues by utilising circular economy business models in which technical and biological metabolisms have to strictly be kept separated. Only a clean product allows for either composting or infinite recycling. Hybrid products therefore still cannot be re-used as nutrients today. As technology develops further, theses issues could be solved in the near future. Of the different Circular Economy business models described, not all are of equal power in addressing change in a systemic way and on such a large scale that is needed to overcome the linear lock in. But the exemplified companies have proven that the business models work and are able to reach a critical mass. All the models presented have proven to be able to reduce the amount of waste that is currently produced in the apparel industry on different scales. The results have shown that Sharing Platforms and Recovery & Recycling models can add to eco- efficiency but are still trapped in a linear thinking. Product as a Service models are one step ahead. The shift in ownership from consumers to companies requires larger scale solutions to end-of-life products thus raise awareness and force companies to find solutions for their waste. When companies find a way to utilise that waste as value, transforming the material into feedstock again, they have climbed further up the ladder and come closer to or even achieve Circular Supply Chains. If companies manage to design their products for endless recycling (disassemble or composting respectively) and keep their production pollution free they are fit for a truly circular model and could strive for a Cradle to Cradle certification, arguable the cleanest of all models presented, yet difficult to achieve.

When Walter Stahel was asked so why should businesses do it? he answered: „Well, the fact is, they don’t have to do it. When I gave presentations in the 1990s about the circular economy, I would often conclude with a slide that said ‘You don’t have to do any of this, survival is not mandatory’. I gave up using it after someone told me that slide was really depressing, but it is still the case for

60 sustainability. You can completely ignore all the concepts of the circular economy, but if one of your competitors picks it up and it’s successful, then you have solved your problem, because your company will disappear”. The business is transforming now, for those companies who have not started yet, it is time to join in. One thing is for sure. The circular economy is gaining momentum for many different reasons. A variety of models are in place for companies to adopt and start fighting the environmental problems that are so pressing in the industry.

The time to start is now.

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Vigga, S. (2016d). Consumer Culture: The Day Your Baby's Wardrobe Became Better Than Yours | Vigga Svensson | TEDxKEA (Video File). Retrieved on April 19th, 2016 from https://www.youtube.com/watch?v=4v4Pf5Dt8Hg

Vo, D. (2016) The innovators: slow fashion that cuts waste and lasts longer. In: The Guardian. Retrieved on May 8th, 2016 from https://www.theguardian.com/business/2016/may/08/the- innovators-slow-fashion-zero-waste-movement-designer-dan-vo?CMP=share_btn_fb

Waste2Wear (2016) FAQ. Retrieved on May 4th, 2016 from http://www.waste2wear.com/#!faq/cwhs

Ward, A. (2011) H&M hit by soaring cotton prices. Retrieved on May 7th, 2016 from http://www.ft.com/intl/cms/s/0/95c54d66-5b68-11e0-b965- 00144feab49a.html#axzz49Ds74Y1K

Wearpatch (2016) Vision. Wearpatch. Retrieved on April 19th, 2016 from https://www.wearpatch.com/vision.

WEF (2013a) From ‘take, make and waste’ to the circular economy. Retrieved on March 12th, 2016 from https://www.weforum.org/agenda/2013/09/from-take-make-and-waste-to-the-circular- economy/

WEF (2013b) Engaging tomorrow’s consumer. Geneve: World Economic Forum. Retrieved on April 17th, 2016 from http://www3.weforum.org/docs/WEF_RC_EngagingTomorrowsConsumer_Report_2013.pdf

Welt, die (2013) Unerforschter Kontinent aus Plastikmüll im Pazifik. Retrieved on May 18th, 2016 from http://www.welt.de/wissenschaft/umwelt/article116208107/Unerforschter-Kontinent- aus-Plastikmuell-im-Pazifik.html

Westwood, V. (2016) Fast Fashion is drowning the world. We need a Fashion Revolution. In: Greenpeace international. Retrieved on April 19th from http://m.greenpeace.org/international/en/high/news/Blogs/makingwaves/fast-fashion- drowning-world-fashion-revolution/blog/56222/

Whitehead, S. (2015a) H&M Conscious Collection. In Huffington Post. Retrieved on April 16th, 2016 from http://www.huffingtonpost.com/shannon-whitehead/hms-conscious-collection- _b_7107964.html

Whitehead, S. (2015b) Is H&M really the World`s most ethical company. In Medium. Retrieved on April 16th, 2016 from https://medium.com/@shannlw/is-h-m-really-the-worlds-most-ethical- company-31d4eee6fee7#.g0cnfnrdj

Wiesen (2016) Rausfischen, Mode machen, anziehen. Retrieved on April 30th, 2016 from http://dradiowissen.de/beitrag/plastikmuell-im-meer-recycle-mode-von-adidas

Willison, J. (2016) Shopping all over the world: Enrou is throwing a spotlight on globally conscious style. Retrieved on April 19th 2016 from https://collectively.org/en/article/shopping-all-over- the-world-enrou-is-throwing-a-spotlight-on-globally-conscious-style/

World Bank (2016) Climate-Driven Water Scarcity Could Hit Economic Growth by Up to 6 Percent in Some Regions, Says World Bank. Retrieved on May 3rd, 2016 from

79 http:://www.worldbank.org/en/news/press-release/2016/05/03/climate-driven-water- scarcity-could-hit-economic-growth-by-up-to-6-percent-in-some-regions-says-world-bank

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WWF (2007) Cleaner, Greener Cotton. Retrieved on May 8th, 2016 from http://wwf.panda.org/wwf_news/?115940/Cleaner-greener-cotton-Impacts-and-better- management-practices

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Zarroli, J. (2013). In trendy world of fast fashion styles aren’t made to last. Retrieved on April 16th, 2016 from http://www.npr.org/2013/03/11/174013774/in-trendy-world-of-fast-fashion- styles-arent-made-to-last

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Zero Waste Europe (2016b, April, 22nd). Impressive commitment of Ljubljana: (…) & recycling from 63 to 78% by 2025 (Tweet) Retrieved on May 8th, 2016 from https://twitter.com/zerowasteeurope/status/723438954976935938?lang=de

Zimmer (2015) Study 34: Ethical, Minimal-Waste Knitwear Made With Deadstock Yarns. Retrieved on May 17th, 2016 from http://www.ecouterre.com/study-34-ethical-minimal-waste-knitwear- made-with-deadstock-yarns/

80 Appendix

A. List of companies covered

Sharing Platforms Vinted Vestiaire Collective Swapping Clothing exchange ThredUp Recovery and Recycling Freitag Timberland Nurmi Study 34 Nudie Jeans Patagonia Nudie Jeans Rapanui Product as a Service Rent the Runway Vigga Mud Jeans Myonbelle Le Tote Gwynnie Bee Belly Bump Boutique Be Mini Couture Rentez-vouz Circular Supply Chain H&M Freitag Cradle to Cradle Trigema Slow Fashion Jigsaw Zero Waste Nurmi Study 34 Dyes DyStar Deepmello Blond&Bieber

81 B. Further Figures referred to throughout the thesis

Figure 8: Apparel Fibre Consumption developed & developing countries (FAO UN & UCAC, 2013, p.3)

Figure 9: Spending on clothes as share of total spending (US) (Bain, 2015)

Figure 10: Spending on clothes as share (Bain, 2015)

82

Figure 11: Garments per capita (Bain, 2015)

Figure 12: 5 Business Models after Lacy & Rutqvist (2015)

83

Figure 13: Key Players and Drivers for Change (Graff, 2016)

Figure 14: World Circular Economy Flow (Haas, 2015)

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Figure 15: Levi's 501, PLA (Levi's, 2015)

Figure 16: Worldwide production volume of chemical and textile fibers from 1975 to 2014 (Statista, 2016c)

85

Figure 17: 5 reasons why not to use cotton (Freitag, 2016e)

Figure 18: Organic Cotton Production (Organic World, 2016, p.128)

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Figure 19: One tranche of Vigga clothes (Vigga, 2016d)

Figure 20: Jigsaw slow Fashion advertisement (Chua, 2015)

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Figure 21: Patagonia Advertisement adressing U.S.A Black Friday madness (Lutz, 2015)

C. Expert Interviews

Interview 1: Albin Kälin, CEO EPEA Switzerland, 14.03.2016, 11:00h CET+1

Interview Request via Email: Grüezi Herr Kälin Ihre Kontaktdaten habe ich von Herrn Ostergaard von Malik Management (wo ich als studentische Aushilfe arbeite) bzw. von Prof. Dyllick erhalten, bei dem ich meine Masterarbeit schreibe. Das Thema meiner Arbeit ist „Circular Economy approaches in the apparel industry“. Das Buch cradle to cradle habe ich bereits gelesen, ausserdem habe ich Recherche im Internet durchgeführt. Herr Ostergaard hat mir dringend empfohlen, Sie um ein Interview zu bitten, weswegen ich mich nun an Sie wende. Ich würde mich sehr freuen, wenn das klappen sollte. Schon einmal recht herzlichen Dank und beste Grüsse, Lukas Fuchs

Interview: Comment from A. Kälin: Before we start, I have to clarify why this we are called Cradle to Cradle (C2C) and the others Circular Economy. We had to trademark the name for protection reasons, before somebody else comes and uses C2C. Also we wanted to have a certain degree of control over what we do. Many talk of CE, which is well and fine, but many stay in linear thinking and optimise recycling, which is not C2C. Many things found in brochures are like that. They are optimising parts of the old cradle 88 to crave system. But we have developed a method on how you do C2C design with 15 steps. A normal industry design starts at point 10, so we have nine steps before that. There is a certification association, with 17 surveyors. We want to be the experts. We want to judge materials. We want to make innovations. Our focus is not to be strategic. We are not appearing as a consultancy though. Of course we support our clients like that still. But we are focussed on innovation and material, e.g. from a chemical point of view. And we do business models and compete with consultancies. We want to coach, and we do material assessments. But we want to implement through coaching, the companies have to do it themselves.

What is also important is that C2Cis no Eco-label. They are product-focussed (e.g, Oeko-text, FSC), we want the whole palette. The difference is that those labels set limit values for e.g. formaldehyde, C2C do not allow them at all. And in the textile industry there are 450 different labels today, some retailer have their own because they want to hide things. labelinfo.ch is a comparison portal that tries to shed some light into that jungle.

You have to differentiate between textile and apparel. The goal always has to be the gold certificate. Trigema for example only gets silver for some reasons. Many things are not to be disclosed because we serve as a trustee.

Interviewer: Why has Puma not managed to do it?

Kälin: That's easy, they do not have their supply chain under control. And the willingness to enforce is not a given apparently. Why? Because then they cannot dictate prices. That is not for puma in particular but accounts for the whole industry. We have as C2C be very mindful not to get trapped as well. Control is super important otherwise Chemicals will be used that are not allowed. In textile we are talking about 50-100 suppliers. How do you make sure that they are all aligned? Control is super important.

Interviewer: Willingness to change and ability to change in the textile industry is low then?

Kälin The willingness to change is certainly low. Plus, many problems, like Chemicals are not solved yet in a C2C way. Product must be provided in satisfactory scale to the textile industry. With Trigema it was possible because they are vertically integrated and control great parts of the supply chain. Until today we have not been able to make a suit material. Extremely difficult have also been

89 accessories. But now we have found solutions. What is important is closing the loop and how can you do that in the fashion industry. In leasing schemes for example it is more easy because there is a fix point where you can take the clothes out, namely at the lessor. But globally in the fashion industry there are many problems. On the one hand closing the loop on the technical loop.

That you have to see in commodity streams that are not industry specific, like Polyester or PET. All those blended products are really difficult. For the biological metabolism it is legally not allowed to compost clothes that are industrially produced, against which I have been lobbying for 20 years.

When looking at H&M it is not OK what they are doing. They are free rider and even using the terminology closing the loop in one collection, which is far from it. They are doing marketing. To battle those, we have to bring real solutions. That is the problem with many labels, whose organic cotton is full of chemicals. Usage of polyester yarns and buttons. 0.8% of cotton is organic, but a lot is advertised as organic. Organic cotton is one thing, but the chemicals have to be right and yarns, buttons, labels have to be biodegradable as well. Plus there is not C2C print until today. Those companies suggest that they are eco using some certification, but those are not the solutions. C2C is complex and difficult to achieve. Even companies like Hess Natur recoil when hearing about the requirements.

Interviewer: So why is Trigema doing it?

Kälin: Because Grupp supports it, sees that C2C strengthens the brand and because they are vertically integrated to do it themselves. And I have been accompanying them since 12 years. Many things have changed.

Interview 2: Markus Zils, Founder and CEO of Returnity Partners. March 31st, 2016 20:00h Dr. Markus Zils holds a Ph.D in operations research in economic modeling in transportations and network design, a masters degree in Management Science from the University of Cologne and a masters degree from the Community of European Management Schools (CEMS), H.E.C, Paris. Prior to founding Returnity Partners, Markus has been a senior principal at McKinsey & Company, where he led McKinsey’s circular economy service line and the global logistics solutions initiative. Today Markus works with private companies, public and academic institutions and investors to create and share in the value of an accelerated transition towards a circular economy. Interview request via personal contact on Linkedin (March 9th, 2016)

90

Interview: Interviewer: Question on biological metabolism and complexity of the supply chain. How can you address this complexity when trying to change your product? Zils: The main problem is, that most products are Hybrids, so not clearly to be allocated towards the biological/technical metabolism. That makes the recovery difficult, because we have hybrids from polymers and natural products. That with regards to packaging, bleaching, performance concerning longevity etc. This is why you have to think about loop design. Are we targeting or talking closed loops, so that we can bring back the nutrients into the biological loop without much processing? Or are we thinking about decomposable nutrients, so that you can separate the nutrients. Those are the primary design question in the industry. The first one goes with performance loss or constraints in colour palettes though (check PUMA) etc. Remember that we are talking fashion item here (H&M, Zara), who optimised their business model towards fast and small series (me: in large volumes). This you can compare to professional wear that can be designed for longer use. This opens up the question of material. This is not C2C but you should be looking at the issue also from the point of use. So what is the goal, reuse or C2C? Talking about the supply chain: This is not a problem any more today, even though products are made of many sub modules and sub contractors. They are super differentiated. The Supplier makes what is being asked. This can be dealt with by the market. There can be a challenge to find suppliers if you ask for smaller amounts since economies of scale are then lost. This makes price sensitivity an issue again. When a fashion company wants to waiver Chemicals or change things, this is not a problem of supply chain configuration but more of finding the right partner. Here we are talking volumes again: Are alternative partners able to deal with the askes volumes? à active supplier development is being asked here. Interviewer: Reverse cycle logistics: What are the Challenges to get the products back? Zils: 60years is unrealistic, since reverse logistics has no other challenges than inbound logistics, when it comes to both transport of intelligence. What brings the most difficulty is the dark side of the moon effect. Nobody has really been structurally working on the issue yet. Competencies are there but not yet linked properly. So we are talking intelligently linking the established skills. This is an area where you can accomplish a lot when employing enough capital. Again question: which kind of loop are we talking? Closed loop, open loop, cascaded loop? Closed loop brings market share effect, repeat sale effect, trust effect. This also “limits” the treatment options. If you do open loop, you need technology at scale to be able to sort and separate accordingly. There are a growing number of people who are convinced that you can disassemble on a molecular level in the near

91 future. I:CO tried with measurement processes to analyse what the products are made of. On this basis they want separate and check of the are going to reuse, disassemble or shred the product. Those techniques are going to be refined. The third solution are cascaded. So you could shred the textiles, and use them as insulation e.g. for construction or in furniture. But by doing so you deteriorate your chances of getting back fibres, (me: thus down cycling?). Interviewer: Coming back to technology, what can product passport help? Zils: In ship construction there are only 3/4 different types of steel, which makes it easier to make a product passport like Maersk is already doing; material passport. Also being done in airliners. But here we have few but large suppliers. In textile there is a much more polycentric and fragmented market structure. This is what puma, H&M and Trigema are trying to do. Simplify their product lines and tending towards a closed loop. Of course at Maersk the product is more important and steel can be recycled 3 or 4 times without deteriorating the performance. Fibre based products can only be recycled 2 or 3 times but with much less quality. But I think that standards can be put into place and the intelligent diagnostic is on the verge. But this requires a supply chain that is is divided into parts, which is probably not doable without intervention from outside. At best win win, which is usually not the case in such a competitive environment. Technically possible, but from a supplier`s perspective less likely. Interviewer: What power do policies and standards and enabling Factors have? Zils: Standards from WEF are not to be expected to be published prior to the paper, since this is market making policy. Black and white world. So the change in the supply chain should leave nobody worse off than before; always Pareto optimum. This is more likely to be the case in concentrated chains than in fragmented ones (me: like the fashion industry) with less valuable products. But I think that companies will set standards together. But we are more talking years of decades. Think REACH à Chemical industry is now more or less accepted in terms of responsibility even though it brought higher costs. The problem is that standards are being softened in such sessions, but there will be changes.

Interview 3: Wolfgang Grupp Jr., March 5th, 2016 16:30h-17:30h Wolfgang Grupp Jr. is the son of Trigema CEO Wolfgang Grupp. He is Head of sales and has been essentially involved in Trigema change, Trigema’s C2C subline.

Interview request via Email:

Sehr geehrter Herr Grupp

92 Herr Kälin hat mir freundlicherweise den Kontakt zu Ihnen hergestellt und mir Ihre Kontaktdaten weitergeleitet. Zunächst möchte ich mich sehr herzlich dafür bedanken, dass Sie sich die Zeit für ein Telefoninterview nehmen. Da ich im Moment nur meine Masterarbeit schreibe, bin ich zeitlich flexibel. Daher würde ich vorschlagen, dass Sie einen Terminvorschlag machen, der Ihnen am besten in den Kalender passt. Im Rahmen meines Masters an der Universität St.Gallen schreibe ich zurzeit meine Masterarbeit zum Thema „Circular Economy approaches in the apparel industry“. Ich möchte mit dieser Arbeit insbesondere die „Müll-Problematik“ in der Bekleidungsindustrie thematisieren und aufzeigen, wie Circular Economy Modell helfen können, diese Problematik zu lösen. Da Cradle2Cradle Produkte im Moment die ultimative Lösung im Bereich Circular Economy darstellen, werde ich dieses Konzept selbstverständlich vorstellen. Mit Ihrem Interview helfen Sie mir ausserordentlich, möglichst nahe an der aktuellen Situation in der Industrie zu sein. Bitte finden Sie im Anhang bereits einen vorgefertigten Bogen, mit den Themen bzw. Fragen über die ich gerne mit Ihnen sprechen möchte. Falls Sie sich ein Bild von mir machen wollen, finden Sie meinen CV ebenso im Anhang. Ich freue mich auf Ihre Antwort, mit freundlichen Grüssen Lukas Fuchs

Interview:

Interviewer: Why have you decided to develop a C2C product? Grupp: In 2006 Prof. Braungart from EPEA approached us and introduced the C2C model. He told us about the resource scarcity projected to happen in the (near) future which forces us to do recyclable things. Since we only produce in Germany we always have to be up to date from a technological perspective and have our eyes on the market. We saw a good fit with our strategy and committed to the development which we knew would be long term, but for a very innovative product. We want to have cutting edge technology and be up to develop such things. Interviewer: Do customers know and appreciate the product? Grupp: In textile there is an abundance of certificates, which makes it difficult. What is appreciated the most at the moment is organic cotton. He rather doubts that C2C is a selling point to the masses. There is a small group of people who actively seek C2C though. He has a feeling that this group is growing and this is also what they are hoping for. When explaining the concept, people like it a lot. Organic cotton is with most customers a more important or even decisive selling point. C2C restricts the number of possible colours.

93 Interviewer: Biological Metabolism On your homepage I found that you use organic cotton for your C2C products - Why organic cotton? - Do you research alternatives since organic cotton is highly water intense? Are you interested in fibres like hemp or flax? Grupp: There are many things possible. But! We are starting with the fibres in our production, which is geared to cotton, so new fibres would have to be a fit with the existing machines. We are interested on alternatives, but it must make commercial sense and must be scalable. We would be happy to adopt innovations from suppliers should there be some – then they will be tested. At the moment organic cotton is the choice. It is difficult to predict; development leads do need some time though. Interviewer: So the shirt can be composted? Also concerning dyes? Grupp: Yes, it takes 9 months, but has to be covered with soil. We have the C2C silver certification which means that brandings are not 100% biodegradable. But that is only little. And nothing is hazardous. The dyeing process is described on the homepage, which is also my state of knowledge. We use hydrogen peroxide dyes which is all environmentally friendly. The dyeing process is one of the most hazardous process in fashion. Through C2C processes our dyes are environmentally friendly, which limits our range of colour, 20-25 colours are possible. A bright orange for example would not be possible ad hoc. as we have to our suppliers and do several testes before and try different mixtures until we get a biodegradable colour. This is quite a long process. Interviewer: The next question concerns dyes which is also compostable. If disclosable I would like to know more about the substances used Grupp: Unfortunately, I cannot answer to that. Interviewer: At the moment products are composted. Would fibre recycling be thinkable as well? Grupp: We do not do that. We are going the compostable way. At the moment we are doing T- shirts, Poloshirts, Sweatshirts and everything else which can be done with roundknitting machines. For that it does not make commercial sense. For products like Jeans it might would make more sense. Interviewer: Technical Metabolism Are you thinking about bring C2C products with synthetic fibres out? If so which material? What would be the greatest challenges? Grupp: There is a possibility to bring synthetic fibres into a biological circle. What could be a goal in the future would be that we could sell synthetic fibres as C2C product. But that would need to be compostable, so a natural fibre. I understand synthetic as functional wear, e.g. for sports. This is pretty difficult. What I can say is that the quality has to be stable. Also after 10-15 or more washes. This is the crux when doing a compostable product. Interviewer: Clippings

94 On your homepage you published that waste is kept as low as possible supported by computer technology. What happens to the waste that occurs anyway? Grupp: We always try to make the most of our material also the waste, for example make them into cloths, bags, mobile phone covers. 100% is not possible. This is not C2C specific but for the entire production and part of the philosophy. Interviewer: Challenges What have been the greatest challenges to producing a C2C product, please along the supply chain. Grupp: Funny example: A customer imagined in like an apple and asked what happens when he puts it in the cupboard, does it start to compost? This is why they took out the term “compostable”. From a Marketing view people need to understand it correctly. Now they use C2C and explain the concept. Also all the little parts need to be certified like zippers and buttons. Interviewer: With the organic cotton suppliers it was all fine? Grupp: Generally, suppliers are not psyched on small quantities. So you have to convince them with a growing outlook. This is why fashion positive has been set up to network, educate and show possible customers that there is a market. Interviewer: How did the name Trigema change evolve? What about sales channels? Answer: Trigema should be inside. Own retail for Trigema change would be thinkable should demand be there. At the moment the conventional Trigema parts and the C2C parts go well together in the stores. However, the change products have their own prominent positioning within the stores like a shop in shop principle. We do have retail customers who seek C2C product like Cradleution and http://tidtilomtanke.dk/. Interviewer: C2C share At the moment C2C products have a 4-5% share of all products offered by Trigema. What is the goal? Grupp: As of today it is not possible. We do have fleece in collection with polyester. We would have to limit our production to only a few materials which would limit the whole production. We always strive for eco-friendliness and to minimise our ecological footprint. But C2C is not compatible today with too many materials. Interviewer: Anything else you would like to add? Grupp: Personally this is a good vision but difficult to fully implement. It is important to do something and striving for C2C is already a very good start because it make you develop towards that goal. You should not think that all other product are bad. Not everything is producible with recycled material or organic material. You also have to look at transportation etc. Parts of C2C can also be implemented into the rest of the production also without certification. For us C2C is also important from an Image perspective. Customers see that we researching here which shows the customers already the commitment. This can also help the other products. Even a smaller step into the right direction is progress.

95 At the end of the day, the bottom line needs to be right and the innovation has to be profitable for the business in the long term.

Interview 4: Daniel Rohrer, Senior Product Manager F-abric, Freitag lab AG. May 10th, 2016 14:00h -14:45h

Daniel Rohrer serves as a senior product manager in charge of Freitag’s F-abric. This position makes him an expert on compostable clothes, thus closing the loop.

Interview request via Email:

Hoi Daniel

Der Mario Malzacher (wir kennen uns von oikos) hat mir deinen Kontakt gegeben, nachdem ich eure F-abric Kollektion entdeckt hatte. Ich schreibe grade meine Masterarbeit an der Uni St.Gallen zum Thema „Circular Economy approaches in the apparel industry“ mit einem speziellen Fokus auf die Massen an Müll, welche in der Industrie generiert werden. Da ihr ja absolute Vorreiter seid und ich eure Kollektion echt cool finde und auch schon ausführlich in meiner Arbeit thematisiere, würde ich gerne ein kurzes Interview mit dir führen, um noch die eine oder andere offene Frage zu klären, auf die ich über eure homepage und Presseberichte keine Antwort finden konnte. Ich weiss, du bist vermutlich sehr beschäftigt und bekommst einige Anfragen, aber würde mich sehr freuen, falls es klappt! (da am 23.5. Abgabe ist wäre es bis Freitag ;), den 20.5 möglich das Gespräch zu führen und noch in die Arbeit einzubauen). Da ich mir während der Recherche bereits immer die Fragen aufgeschrieben hatte, die mit eingefallen waren, kann ich sie auch gleich im Anhang mitschicken.

Ich freue mich auf deine Antwort Beste Grüsse, Lukas

Interview: Question 1, Volume - What is the volume of your compostable collection? In amount of pieces per year o Has the volume grown?

96 Rohrer: It is still a small project, very new business thus compared to the bag business a very small part. Must be build up slowly. Interviewer: Do you only sell in Switzerland or internationally? Rohrer: Since the start we are selling internationally. In the beginning we had very few customers and styles but we are developing slowly but surely both styles and wholesale partners. About 40 wholesale partners

Question 2, Supply Chain and Product - What have been the most challenging hurdles in going circular? (I saw the video on how you found your suppliers) Rohrer: The development of the fabric has for sure been the most demanding challenge. It sounds absurd, but if you want a fabric that does neither contain cotton nor polyester and grown in Europe, then choice is already vanishingly small. To develop the fabric that has denim quality (robust and solid) has been the most complex and difficult one. Then there are side shows, where do you get the yarn from that is not made from polyester? Where do you get a button from that is compostable and washable? The small details cost heaps of time. Labels are another story. Sourcing in Europe and making it compostable are very high bars to jump over. We are actually talking about things that the industry does not know about. So pioneering work. That is still the case today. A fabric made from viscose and linen cannot be ordered anywhere. This must be developed for us. On top: you are a nobody and cannot lure suppliers in with quantities of sales, on the contrary. It takes a lot of convincing that they are working with you. From the ordering a yarn, making it into fabric it takes 9 months. So you cannot just order. And when you finally have the fabric you have to get to know it, its properties, shrinkage etc. We have discovered that behind a garment is a lot of craftsmanship. Interviewer: Did new machines have to be developed extra for you? Rohrer: That`s the thing: How can you use old linen or today’s cotton machines for such a fabric. That is not a step the industry would have made for us. The thought that everything can be made in one house is a utopia. For that to happen we would have to become a big producer. This is not like with the bags where you can start small. It is a problem that the current machine park is catering for polyester and cotton. Interviewer: So how did the problem get solved? Do the conventional machines spin your yarns? Rohrer: Well it is a lot of old knowledge, a lot of experimenting a lot of craftsmanship and partly very long cycle time. The fabric is very difficult to produce and we are very happy that it is running now

Question 3, Customers

97 - Are customers willing to pay a premium? - Is there a market? - Who else is developing closed loop products? (I know the following for natural and natural-synthetic fibres: Trigema Change, Rapanui, Mud Jeans, Komodo, Braintree, People tree, as brothers we stand) Rohrer: What is interesting: Even though we have a high price point, there is loads of competition that are selling at the same price. So we have a competitive price. We have neither seasons nor collections. That is only possible through our own stores where we can sell the products over the years without going on sale

Question 4, Product - What material do you use for the buttons? Buttons: Steinnuss (virgin ivory)? - What about zippers? - Which kind of dyes are you using and how environmentally friendly are they? Do choices of dyes limit the amount of colours you can offer? I know from Trigema change that they are limited to 20-25 colours at the moment. Interviewer: Is it difficult to get virgin ivory supply? Rohrer: In our quantities not. But they do not grow in Europe but this bitter pill we had to swallow. But the further processing takes place in Europe. Interviewer: Do you use zippers? Rohrer: No and I have no knowledge of compostable zippers somewhere in the world either. Interviewer: So you would have to find a solution like you did with your Jeans buttons, that are designed to be unscrewed and recyclable. Rohrer: The button for Jeans with the unscrew mechanism we even have a patent on. Before we decided to opt for the virgin ivory button, we tested wooden European alternatives. This is a good example of the small things that are very difficult. So for a zipper I think that would be the same. Interviewer: When I talked to Mr. Grupp from Trigema, he told me that they are limited to 20-25 colours because of dyes and the C2C certification. Do you have similar limitations? Rohrer: Kind of. Dyes are super difficult. The process of dying is very difficult to dominate. We are more dependent customers here. It is very difficult that they change their dyes so that we can use them. We do not use C2C certified dyes, but dying processes that are suitable for us.

Question 5, Cost structure - I understand it that is nondisclosable data. But would it be possible to move a lot further towards mass-markets by squeezing margins, sourcing cheaper (without compromises on quality), and other measures?

98 Rohrer: I cannot answer with figures, but I can clearly say that our clothes of course are expensive. Because it is completely European. The harvesting of the fibres, the production, everything. Which means we pay EU-European wages that are expensive. But it is not only the wages that are expensive, the craftsmanship is part as well which is very sophisticated. You would not be able to source such a fabric from China. There is a lot of special expertise and know how behind which you also have to pay. Choice of colours. Choice of refinement processes. The Yarn. It is.

Question 6, Certification - Do you strive for C2C certification? And why (not)? Rohrer: For us it had been incredibly difficult to build up a network. And the network is still fragile. Trigema has been producing for a long time now. We are only a producing company with the bags. Until the point in time has come where our supply chains and this project are stable enough it will take time. So getting C2C certification it is difficult to get. But we have our fabrics test by oeko-tex class one so they are suitable for babies to chew on. So not an issue at the moment. Too much effort and we are too small at the moment. We will see if that is a topic in future. At the moment I would say that we have around 50 suppliers altogether. Hemp, Linen, harvesting, weaving, spinning, dying, refining etc. for every project: T-shirt, Hemd, Jeans they all have different fabrics.

Question 7, Longevity - What are you experiences with longevity (also concerning work wear?) - Do you also sell your work wear to others? If so what is the split between professional wear and leisure wear? Rohrer: We are wearing our products for three years know and the one I am wearing today still feels like new. So longevity is a given. The fabric is also an anti-bacterial, so it does not smell and you can wear it longer than cotton. I would compare the fabric to be as gentle as cashmere or merino wool. It is not performance wear for sports but a lot better when you go on a backpacking tour for example. For two weeks, a t-shirt, long sleeve and a shirt are enough. It also has a cooling effect. Also you do not need to wash it as much and you can wash it at cooler temperature. Don't tumble dry and use eco friendly washing powder, voila you have reduced your footprint during the use phase a lot. We don't view ourselves as a fashion-company. And we absolutely are slow fashion. We do not have seasons. We do not go on sales. We sell it over time anyways.

Question 8, Cotton

99 - Cotton is greedy for space à how much more efficient on the same space is modal?

Rohrer: It depends on the region that you are at. Harvesting cotton in the US differentiates massively from harvesting cotton in Africa. But what I can say is that Modal is by far better. Also you have to take into account that modal saves CO2 (we are talking about trees here!) I would check Lenzing Modal online!

Question 9, Mgmt. implications

Rohrer: We are not working in departments. We are working on a project basis. This means that the projects are set after who we need. The teams are diverse and members can be part of different projects at the same time. Sometimes you focus on one project sometimes you have many at the same time. So are short term, some are long term.

Interview 5: Nina Bachmann, Swiss Textiles, Head of Technologie & Umwelt, May 9th, 2016 10:00h – 10:45h

Nina Bachmann serves as head of technology and environment at Swiss textiles and is an expert on fibres and materials in the apparel industry.

Interview requested in person at the 2016 Un-dress workshop with the topic “Faire Arbeitsbedingungen & Nachhaltigkeitsproblematiken entlang der Supply Chain”

Question 1: 1) A 20% share of recycled cotton is the maximum a product can contain at the moment. Why is that and what is the technological outlook on that? For example, you can find that figure at Nudie Jeans, Mud Jeans, or H&M. They claim that from a quality perspective the post-consumer recycled fibres are not good enough to be spun into a new fabric without the addition of virgin cotton - What are the limiting factors? - What is the technological outlook on that?

Bachmann: It's really a technical issue, which is the limiting factor at the moment. When cotton textiles are recycled, the textiles are torn apart. This is done by a shredding machine which shreds the textile into fibres. In this shredding process, the cotton fibres are shortened. The shorter the fibre the

100 worse the quality. You could imagine it like that: When you spin the fibres and the fibres are shorter, there are more ends are bulging which translates into a raw yarn. Naturally there are shorter and longer fibres in cotton. But when you manufacture high quality cotton yarns then you use the long fibres and the short ones are used for rawer yarns. In the shredding process the long once are torn into short fibres. So the shredding process decreases the quality and makes the yarn rawer, which is not appreciated by the customers.

On the outlook I do not have any information. As of now I do not think that the process will be further developed, because the main focus at the moment is not on cotton but on alternative fibres. Fuelled by a low cotton price I cannot imagine that from a business perspective people will take the investment to develop process that is able to produce a quality yarn made of 100% recycled cotton. There are more efforts towards alternative fibres developments, for example cellulose fibre. Interviewer: Since we are there at the moment, I would be happy if you continue with the alternative fibres right away. Bachmann: Particularly within the last few years, major progress has been made especially in alternative fibres. Cellulose fibres like viscose, lyocell or modal. The feedstock is basically wood. With a chemical process a natural-chemical fibre is produced. Cotton, Hemp, and flax are natural fibres and next to those there are chemical fibres like polyester or those cellulose fibres. Polyester is made from synthetic feedstock, oil, while cellulose fibres are made from natural feedstock, but are chemical fibres. The cellulose process is pretty energy and chemical intense. But the problem is rather that the feedstock come from illegal deforestation, which means there certainly is viscose that is not sustainable. But there are more and more manufacturers that are producing viscose from certified FSC wood und thus sell a pretty eco-friendly fibre. Further more customers appreciate the fibre. For example, modal is very pleasant to wear, a lot more pleasant than polyester and is close cotton properties or even has some that are better than cotton. I think that this is the path into the future in the area of natural cellulose fibres. Interviewer: Which are the properties that are more pleasant? Bachmann: The haptic is very gentle to touch. It has a good drying effect and has a slight brilliance. Interviewer: You said that chemicals are used to produce chemical fibres? What about their ecological compatibility? Would the products be compostable still? Or even recycle? Bachmann: Should be possible yes, but the problem with all recycling processes is that the material that is to be recycled would have to be single origin. And that is basically not true for any textile. This is what Freitag are trying now. That you can take off the buttons and also use flax spinning threads instead of polyester. There are for example almost no 100% modal textiles, which is a problem.

101 Interviewer: Would those products be compostable or do we then have a waste problem still, just with another fibre? Bachmann: It always depends on the chemicals, dyes, crease-resistant treatment etc. If those are biodegradable then yes, but of course this has to be true for the whole process.

Question 2: Synthetic fibres What is the situation like on recyclability of synthetic fibres? - Oil based fibres, like recycled PET bottles? o Would the process be endlessly repeatable? o If so, w/o loss of quality? - What would the life cycle assessment/energy footprint look like?

Bachmann: Theoretically repeatable. One could recycle PET textiles, if single origin. So same problem, textile are mostly not single origin. So besides a few exceptions, econyl e.g., fishing nets, usually PET bottles, not textiles are melted. Always this one step from PET to textile and the circle stops because everything is hybrid. There is a little loss of quality. In the process usually there is a mechanical step first as well. So the most widespread technologies do have a little loss of quality but there are new developments that claim to have no loss of quality. Those are chemical processes. There are many new developments and they are promising. There is somebody in GER and India. I will send you later, but be critical because those are reports from the companies. Interviewer: I could image that the process is pretty energy intense. Bachmann: From the energy footprint it is not too bad. There is about a 60% energy conservation when comparing PET recycling with the manufacturing of virgin polyester. Total lifecycle assessment, then you have to talk chemicals into account. It is difficult to have reliable data since some take the whole product lifecycle into account, other do not. Interviewer: If I understood correctly, the circle is not even close to being close. We recycle PET, make it into polyester and then the cycle is over, since we have hybrid textiles that are not single origin. Bachmann: Yes, that is correct. Plus people do not throw their polyester shirts into recycling bins. So there would be a lot of marketing needed to educate people. So theoretically if I had a 100% polyester shirt, I could just throw it into the recycling bin? Bachmann: Yes, but again that is rarely the case! And maybe in the recycling plant the textile would be sorted out since the process focus is on plastic bottles.

Question 3: Are the following figure realistc or Marketing? I was a little puzzled by those figures: “RPET (=PET recycling) fabric has 50% lower carbon footprint than organic cotton, compared with Nylon almost 90%, and 75% compared to new polyester. It uses 90% less water in making

102 recycled polyester versus virgin polyester and 70% less energy. Summing up, 1 kg of RPET can keep 60 water bottles out of landfill

Bachmann: 75% seems high, I would say until 60%. But they will have their calculations. They are only talking about Carbon footprint, and the calculation depends on the variables taking into account when transforming into carbon footprint. In this way those figures could be manipulated. You would have to proof the calculations.

Question 4: At the moment I would introduce GOTS and Oeko-tex. Would you say that is enough? What about synthetic fibres

Bachmann: No I would say that those are pretty widespread. GOTS is very focussed on cotton, but GOTS 4.0 is also taking synthetic fibres into account, which is new. Oeko-Tex 100 is only focussed on the end product so I would rather take Made in Green or STEP. They cover broader areas and are pretty widespread. There is also the Made-by NGO. They are not providing a standard per se but compare different fibres on their effect on the environment. They have 6 factors on which they compare and e.g. mechanically recycled polyester gets a better result that chemically recycled polyester. I would check that out. But it is not a standard! And it is often the commodity that is certified. But there are a couple of steps after that as well! That should be mentioned. The fibre is one thing but afterwards there is also dying, transportation, refinement etc. Those are factors that have a big influence on the complete life cycle assessment next to the feedstock.

Interview 6: Helga Vanthournout, Senior Expert Circular Economy, McKinsey Geneva office, May 20th, 11:00h-11:45

Helga Vanthournout is a Senior Expert with McKinsey and Company’s Center for Business and the Environment. Based in Geneva, she drives McKinsey’s client and knowledge activities within McKinsey’s Circular Economy Special Initiative, as well as its broader waste and resource management agenda. Before overseeing the development and delivery of CE LABS, an experiential workshop series for clients on the CE journey, Helga led McKinsey’s data collection, analysis, and project management for the critically acclaimed reports “Towards the Circular Economy” published by the Ellen MacArthur Foundation.

Interview requested through a personal contact.

103 Topic: “Management Implications when companies adopt a Circular Economy model” I would like to approach the issue from a St.Gallen Management Model perspective. What are the implication of the following levels: - Strategy - Structure - Culture Classifying the implications after Lacy’s 5 Business Models would be beneficial: 1) Circular Supply Chain 2) Product as a service 3) Recovery and Recycling 4) Product Life Extension 5) Sharing Platform

Interviewer: Thinking of fashion corporations that want to go circular. They would limit themselves because in circular models there are less materials, colours available. What would be the implications on culture and structure?

There are always design constraints for designers. And they can deal with those. It is a matter of how the new constraints are presented. If you give them a new challenge to design in a circular way it is certainly better than telling them these are the constraints, deal with it. The challenge is that today there are a lot less tools available for circular challenges. So constraints are not bad per se. It is at the same time a cultural and structural challenge. Structurally designer and not yet educated enough and do not have enough material at hand to approach such challenges easily. So in the end it is not worse than other constraints, like budget constraints. All designers work with budged, why should an environmental budged be worse than a financial budget

Interviewer: I found your notion on structural issues interesting, that designer need education. So they needed to be trained first

Vanthournout Exactly. Since it has not been a constraint yet, there have no efforts been taken in educating them. There is a good clip by Nike touching upon the culture of design when it comes to sustainability. I would check that out. It is very inspirational. This is one way to address cultural change in a company.

Interviewer: I have already featured the Nike app “making”. That would then be a first step to educate designers?

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Vanthournout: Indeed.

Interviewer: When we talk about PaaS models and think of companies that have only been selling clothes before. What implications would this change of strategy have?

Vanthournout: The biggest challenge is that a company is judged on throughput, thus bonus systems are based on throughput as well. Changing strategy has therefore also implication on sales, who are judged on sales volume. But it has also implications on the purchasing department who are evaluated on how low they can purchase. Now with a PaaS model you would have to how much utility and therefore revenue can we achieve on the material purchased. So internal KPIs and bonus systems would have to changed.

Interviewer: There comes a question to my mind spontaneously. Companies at least push four seasons and by the end the clothes must be sold. A leasing model would have varying timeframes then.

Vanthournout: I think the pressure to sell would be less compared to the current model. At the moment everything must be sold by the end of the season so the new clothes can be stocked. But when you offer leasing, you cold categorise. There is always a group of people who are willing to buy older stuff. So leasing would offer alternative ways to tackle different customer groups while still making money with the old collection, which is at the moment pushed into the market though outlets and sales.

Interviewer: Would that not be a threat to the company image, especially in high priced-segments if you sell old collections.

Vanthournout: You definitely would have to be careful. Also with regards to cannibalisation. Many companies have sub brands for that. Also you can discriminate between different markets. Some might be susceptive for older clothes at lower price. Of course you must be very careful. But there would definitely be a cultural shift if trying out leasing. I know this from other luxury goods manufactures who fear for their image if affiliated with second hand.

When we talk about luxury and the other business models. Repair, reuse, product life extension. Today, what gets repaired? Nothing but luxury articles. Expensive watches or shoes for example. So the circular business models are fits with the luxury industry.

105 Worn Again, Email answer from Mel Knudsen

Hi Lukas,

Thank you for getting in touch and your interest in Worn Again.

That sounds like a fantastic topic for a Master thesis.

As you are aware, we are in development of a chemical recycling technology for textiles. The aim of the technology is to separate and recapture polyester and cotton from pure and blended textiles and feed the outputs from the process back into the beginning of the existing textile supply chain to make fibre, yarn and textiles again and again. As polyester and cotton combined make up over 70% of textiles consumed, we hope this will go a long way towards eradicating textile waste which has always been our mission.

Unfortunately we don't have time for an interview, so I attach here a FAQ that I hope will answer some of your questions.

Best of luck with your study. Best regards, Mel

106 D. Declaration of authorship

You have to append the following declaration to your thesis and put your signature to it:

“I hereby declare

• that I have written this thesis without any help from others and without the use of documents and aids other than those stated above; • that I have mentioned all the sources used and that I have cited them correctly according to established academic citation rules; • that the topic or parts of it are not already the object of any work or examination of another course unless this has been explicitly agreed on with the faculty member in advance and is referred to in the thesis; • that I will not pass on copies of this work to third parties or publish them without the University’s written consent if a direct connection can be established with the University of St.Gallen or its faculty members; • that I am aware that my work can be electronically checked for plagiarism and that I hereby grant the University of St.Gallen copyright in accordance with the Examination Regulations in so far as this is required for administrative action; • that I am aware that the University will prosecute any infringement of this declaration of authorship and, in particular, the employment of a ghostwriter, and that any such infringement may result in disciplinary and criminal consequences which may result in my expulsion from the University or my being stripped of my degree.”

Date and signature ......

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