Late last year I visited Fashion Enter, a promising social enterprise in North London, as part of our ongoing research into the circular clothing model. This is a key component of Delivering a circular materials economy, one of the 22 positive sustainability themes underpinning the Sustainable Future fund range and helping make our economy cleaner, healthier and safer.
The impetus to rethink today’s current ‘fast fashion’ system comes predominantly from how extraordinarily wasteful it is, and my conversation with Jenny Holloway and Caroline Ash, Fashion Enter’s founder and Chair respectively, was a sobering reminder of this.
Jenny estimated that the hourly wage in a Bangladeshi clothing factory is 36p compared to £12.21 in the UK. This comparative advantage explains why less than 1% of the UK’s clothing is made domestically, and how a great quantity of overproduction can be sustained in the fashion industry.
Low-cost manufacturing facilitates a trend towards consumers over-buying and under-using.
Instead of manufacturing clothes of high quality with a long life-cycle, it is more profitable for the majority of the industry to keep people shopping for new items by constantly updating their ranges and outdating consumers’ wardrobes, using advertising to promote the latest trends. At its worst, fast fashion drives a race to the bottom on price and quality.
The sheer volume of materials used to manufacture garments results in multiple negative environmental impacts and the associated embedded carbon impact is estimated be 10% of the world’s greenhouse gases (source: European Environment Agency). Many clothes end up as waste due to the clothing industry’s systemic problem of over-production. In addition, there are many negative social issues, such as poor working conditions in garment factories.
Data from Euromonitor shows that the early part of this century saw global clothing production more than double from around 50 billion units in 2000 to over 100 billion units in 2015. This reflected trends for consumers to wear each item on fewer occasions – utilisation falling 36% over the 15 years – and instead make around 60% more purchases.
The potential solutions to clothing industry wastage
From a material efficiency perspective this level of overproduction is madness, but what can be done about it?
While there have been some signs of regulation to tackle textile waste through producer responsibility (such as the EU’s proposed Ecodesign Regulation to increase the durability of items), we believe that the main driver of circular clothing business practices will be shifting consumer appetite.
There are a number of business models which are consistent with a shift towards circular clothing:
- Clothing resale – the largest and most promising approach. The US apparel and accessory resale market is estimated by Morgan Stanley to already be worth $35 billion and set to grow in double-digit percentages over the next few years.
- Considerate purchasing/slow fashion – consumer adoption of a focus on product quality and longevity in order to limit negative impacts of their purchases.
- Rental or subscription models – increasing the utilisation of clothes and satisfying consumer demand for new garments without causing additional production.
- Repair – extending garments life cycles by repairing or repurposing/upcycling.
- Recycling – creating new textiles. Currently, only 1% of clothing is recycled back into clothing after use and 73% goes to landfill.
Investing in companies that deliver a circular materials economy
Fashion Enter proposes an intriguing new approach, with aspects of some of the models described above. It looks to provide clothing which is fast and fashionable, yet limiting negative impacts due to a focus on high quality and local production.
Their idea is to use technology to produce clothing that is bespoke to each individual. By scanning your body, Fashion Enter aims to design and produce bespoke clothing that can be made in local factories. A 3D avatar models the clothes, giving confidence on how they will look and fit.
This production model reduces waste and is much preferable to the hit-or-miss fast fashion that is offered today. It also offers full traceability of all clothing through each stage of its production. Circularity also works well with this model, since the same local factory will be well placed to repair clothing that has been damaged.
It is so refreshing to hear of a solution that makes better sense for people, planet and profit than the current system.
In the Sustainable Future funds, we look to allocate our investors’ capital to businesses which are aligned with our sustainable themes and which can deliver profits through positive social and environmental impacts.
Within the Enabling Healthier Lifestyles theme a core position is On Holdings, a Swiss sports brand founded in 2008 which focuses on performance training shoes for running and other sports. While the company is well positioned to benefit from the trend towards people focus more on sports and activity, it has also developed its brand to focus on sustainability as well as performance. It constantly innovates to improve quality and reduce the impact of its products. Some of these innovations include a resale platform for used goods called Onward, and a subscription product service called Cyclon which is designed to close the loop in footwear and apparel, as well as aiming for 100% recycled or organic cotton and 100% recycled polyester and polyamide.
Another stock held widely within the Sustainable Future funds is Winmark, a standout success story of the circular clothing model. This US franchise retailer of second-hand clothes is valued by the market at $1.5 billion, and we think it has plenty of potential to grow from here, generating healthy investment returns.
Winmark extend the lives of clothing by buying high-quality second-hand items for cash and reselling in the same store. Customers bring in their clothing for cash and often choose to spend in store. This both extends the useful life of a piece of clothing and displaces a purchase of a new item, reducing the carbon footprint of the second-hand item by 25%.
Winmark’s business model is inherently a circular one – it profits and makes returns from enabling this buying and subsequent selling of used goods at scale.
Good for the environment, good for customers, and good for shareholders. To read more about Winmark, head to Harriet Parker and Sarah Nottle’s Stocktake company profile.
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