POLITECNICO DI MILANO School of Industrial and Information Engineering Master of Science in Management Engineering ‘A blockchain-enhanced Product Stewardship framework for the fashion value chain’ Supervisor: Prof. Marco Taisch Assistants: Federica Acerbi Rossella Luglietti Thesis Author: Alice Kaimann ID: 903254 Academic Year 2019/2020 2 Index Index ............................................................................................................................................. 3 Index of figures ......................................................................................................................... 5 Index of tables ............................................................................................................................ 8 Acknowledgements ................................................................................................................... 11 Abstract ...................................................................................................................................... 13 Sommario ................................................................................................................................... 14 EXECUTIVE SUMMARY ......................................................................................................... 16 Introduction .............................................................................................................................. 35 Objectives, research questions and methodology .............................................................. 40 Methodology ............................................................................................................................. 44 Section 1 STATE OF THE ART AND PRACTICE ..................................................................... 59 1.1. FASHION INDUSTRY CURRENT STATE AND FUTURE PROSPECTS .............. 60 1.1.1. Fashion industry developments ............................................................................. 61 1.1.2. Supply network structure and pressures ............................................................ 65 1.1.3. Hidden costs and sustainability issues .................................................................. 67 1.1.4. Waste creation: current state ................................................................................. 70 1.1.5. Business-As-Usual scenario: EBIT decline ............................................................ 76 1.1.6. Green consumerism and business development ................................................. 79 1.2. CIRCULAR ECONOMY ................................................................................................ 84 1.2.1. Circularity paradigm definition ............................................................................ 85 1.2.2. Waste hierarchy ................................................................................................... 87 1.2.3. Circular drivers ....................................................................................................... 92 1.2.4. Circular barriers ................................................................................................. 94 1.2.5. Circular business models for the fashion industry ........................................ 97 1.2.6. Circular supply chain management ............................................................... 104 1.2.7. Industry 4.0 and blockchain technology for circularity .................................. 108 1.2.8. Textile reuse and recycling ................................................................................... 121 1.3. EXCESS MANAGEMENT ........................................................................................... 127 1.3.1. Industrial symbiosis ............................................................................................... 129 3 1.3.2. Reverse logistics ..................................................................................................... 132 1.3.3. Extended producer responsibility ........................................................................ 136 1.3.3.1. Market failures analysis ................................................................................... 140 1.3.3.2. EPR characteristics and typologies ............................................................. 142 1.3.3.3. EPR Limits ........................................................................................................... 145 1.3.3.4. The French EPR case for clothing and textiles ........................................ 148 1.3.3.5. Potential solutions ........................................................................................... 151 Section 2 ON-FIELD INDUSTRIAL OUTLOOK ...................................................................... 153 2.1 State of the industry and future orientation .......................................................... 154 2.2 Circular and sustainable opportunities ................................................................... 156 2.3 Need for collaboration ................................................................................................ 159 2.4 Open vs Closed loop debate ....................................................................................... 160 2.5 Chemical recycling debate ......................................................................................... 161 2.6 Closed-loop fashion barriers ..................................................................................... 163 2.7 Current EOL issues ..................................................................................................... 169 2.8 Recyclers’ issues .......................................................................................................... 173 2.9 Consumer awareness ................................................................................................. 175 2.10 Environmental certifications ................................................................................ 176 2.11 EPR debate ............................................................................................................... 177 2.12 Blockchain solutions .............................................................................................. 180 Section 3 BC-PS FRAMEWORK DEFINITION ....................................................................... 187 3.1. CONSIDERATIONS FROM STATE OF THE ART AND PRACTICE .................... 187 3.1.1. Proposed issues to solve ........................................................................................ 188 3.1.2. Novelty of the topics ............................................................................................... 189 3.1.3. Theoretical takeaways to harness ....................................................................... 190 3.2. FRAMEWORK DEVELOPMENT .......................................................................... 193 3.2.1. Framework goals and principles ......................................................................... 194 3.2.2. Business modelling diversification ...................................................................... 196 3.2.3. Product stewardship substratum ......................................................................... 201 3.2.4. Blockchain: the enabler ........................................................................................ 204 3.2.5. Framework Scheme ............................................................................................... 212 4 Section 4 TESTING, FINDINGS & DISCUSSION: .................................................................. 215 4.1. CASE STUDY: MUD JEANS – CIRCULAR VALUE CHAIN .................................. 218 4.2. FLOWS ESTIMATION PARAMETERS ............................................................... 222 4.3. FINANCIAL SUSTAINABILITY TEST ................................................................ 226 4.3.1. Economic viability test – Findings ...................................................................... 229 4.3.2. Economic viability test - Discussion .................................................................... 270 4.4. ENVIRONMENTAL SUSTAINABILITY TEST .................................................... 279 4.4.1. Life Cycle Assessment - Findings ....................................................................... 282 4.4.2. Life Cycle Assessment - Discussion ..................................................................... 291 4.5. INTEGRATED VALIDATION DISCUSSION ....................................................... 293 CONCLUSIONS ........................................................................................................................ 294 Annex I ................................................................................................................. 300 Annex II ................................................................................................................ 301 Annex III .............................................................................................................. 308 BIBLIOGRAPHY ....................................................................................................................... 316 Index of figures Figure ES. 1 - Framework development diagram ................................................................ 17 Figure ES. 2 - Growth of clothing sales and decline in clothing utilisation since 2000 (Foundation, 2017) ...........................................................................................................