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 .............................................................................................