During the G7 held in Biarritz in August 2019, 32 fashion companies signed the “Fashion Pact,” an important statement pledging to gradually align the entire sector with the UN’s Sustainable Development Goals (SDGs). The agreement focused primarily on three gaps, relating to the environment, biodiversity and the climate. Since then, the number of signatory companies has risen to 60, and the calls to action have proliferated, demanding traceability and transparency to realize more sustainable, circular fashion. The industry as a whole has been in a frenzy for years: the social and environmental challenges outlined in the pact make it difficult to envisage the future of fashion without a radical transformation of the underlying business models.
What’s more, the ongoing pandemic - beyond the tragedy in human, social and economic terms - is considered by many experts to be an accelerator for a change that was already underway before the health crisis began. During the months of the lockdown, we’ve seen a growing awareness of the need to put a stop to hyper-consumerism and disposable fashion. Indeed, people are now seeking to extend the life of their clothes by mending or refitting them, or by activating the “second hand cycle.” In this sense, the boom of collaborative consumption, including the second hand and vintage markets, is giving fashion companies food for thought about the potential of new circular business models, in particular in light of the habits of the new generations. Millennials and the Gen Z segment, who are most interested in sustainable circular fashion, already represents a very relevant slice of the global fashion and luxury market.
To rethink the future of the industry, we need to shift from a linear “take-make-waste” approach that excludes the consumer from the value chain, to a more evolved model. For instance, virtuous companies have set up take-back schemes: consumers can take the clothes they no longer use back to stores for recycling and upcycling. A reflection of what is happening in the entire sector is being studied at SDA Bocconi School of Management where a research team is focusing on the opportunities and challenges of circularity in fashion and on the indicators to be monitored to obtain concrete results from circular models.
The new “take-make-remake” value chain, which we can rename “renewed fashion value chain,” is based on principles of eco-design, the use of recycled materials and production processes that utilize fewer chemical substances. Production plants are redesigned to guarantee zero waste, while stores are revamped with an eye to sustainability and circularity, actively engaging the consumer and contributing to enhancing awareness in terms of environmental and social impact.
But what are the specific KPIs for each business model that make it possible to measure circularity and scale up pilot projects? What opportunities for circularity are out there in the Italian fashion system and for our SMEs? These questions can only be answered by establishing partnerships in the value chain and creating synergies between various stakeholders who are interested reshaping the industry, making it more and more circular.
To actuate a new future for fashion, it’s essential to recognize the challenges and opportunities for circularity, taking inspiration from good practices and reorganizing business processes as needed. To this end, it could be useful to consider the six main changes that are driving the fashion industry toward a more sustainable and circular future.
- Value chains must become more traceable and transparent. By 2030, fashion companies will need to face the challenges associated with mapping global value chains; using clearly legible ‘smart’ labels they will share contents that tell the story behind their products. A decisive step in this direction comes from the UNECE Project (United Nations Economic Commission for Europe), “Enhancing transparency and traceability for sustainable garment and footwear value chains.” This initiative calls for the creation of a multi-stakeholder platform, the publication of a Policy Recommendation addressing policy makers, and the establishment of traceability standards and guidelines for clearer mapping of global value chains in the fashion industry.
- Engaging consumers in a “take-make-remake” model will be a source of competitive advantage. Fashion companies need to bring their customers on board with circular value chains, offering a range of options for extending the life of their products. The consumer segment that considers quality more important than quantity will constantly be expanding. One of the pure players in sustainable fashion is Patagonia, the undisputed frontrunner in the evolution toward more circular fashion.
- The use of innovative technologies, along with data collection and analysis, will become increasingly common, leveraged more and more to support human creativity. Fashion companies will be able to tap into a huge amount of data on their consumers; artificial intelligence will make it possible to create effective experiences in which all stakeholders actively take part in the fashion value chain. Some 4.0 technologies can even serve as excellent tools for facilitating the transition from linear to circular value chains and for scaling up pilot projects, as long as they respect the principle of interoperability.
- Fashion companies will make sure they are engaging and including consumers, who will play a central role. In fact, their needs must lie at the heart of the strategies that fashion companies implement. This means product personalization, on-demand collections, a multi-channel approach, transmedia storytelling and one-to-one communication. The industry will be far more inclusive, as a rising number of influential and relevant movements are clearly demanding. One such movement is the Fashion Revolution, which is collaborating with Bocconi University and other international partners begun in January 2021 to realize the COSME project, “SmallButPerfect.” The aim of this initiative is to support SMEs in sustainable and circular fashion and to enhance awareness among consumers on the topic of circularity.
- There will be a gradual transition from product to service. Fashion companies will need to move from production and distribution of products to offering more personalized services such as mending and refitting, renting and reselling. Italian companies such as Drexcode and armadioverde are interesting examples of this tendency toward service. In the future, all our wardrobes will be connected.
- Profits will be generated without causing damage to the environment or to society. Successful fashion companies will be able to integrate aesthetics, ethics and responsible innovation.
Players in the fashion industry are now facing the challenge of reinventing themselves and “refashioning” a new life.
