Circularity Gap Report: Six circular economy strategies examined

In collaboration with the H&M Foundation, Amsterdam-based organisation Circle Economy has published the latest edition of its Circularity Gap Report. For the first time, the organisations have conducted an in-depth examination of the textile industry, revealing that it is only 0.3 percent circular, compared to an overall global average of 7.2 percent. The report analyses how the industry contributes to various environmental impacts and models potential solutions.

It highlights six circular economy strategies in particular that could halve the textile industry’s environmental impacts. However, they are “what if” scenarios, “largely free from the constraints of regulation or political realities” and do not account for technological scalability and the quality of physical flows, such as the quality of post-consumer textile waste or product performance.

“They are deliberately non-time- specific and exploratory. Ultimately, their real-life materialisation does not inform our analysis. This approach allows us to freely imagine what our society could look like with truly transformational change: a textile industry shifting away from its linear past,” explain the report creators.

For instance, approaches such as increasing garment durability, sustainably producing natural fibres and developing circular manufacturing processes could reduce impacts—such as greenhouse gas emissions, water use and threats to human health—by up to 50 percent according to the report. FashionUnited has looked at the six proposed strategies and summed up the findings below.

1) Shift to more natural, local and recycled fibres

The textile industry produces a wide range of fibres, needed for everything from daily wear to specialised technical and performance apparel. “In recent decades, the shift towards synthetic fibres—such as polyester, nylon and acrylic—has been driven by their cost-effectiveness, durability and versatility. These materials now dominate the market, making up 65 percent of global fibre production or 75.5 million tonnes,” states the report.

However, their base in petrochemicals contributes to carbon emissions and environmental degradation throughout their lifecycle, making synthetic fibres environmentally challenging. Thus, “in light of the growing push for sustainability, there is increasing interest in replacing synthetic fibres with natural alternatives,” finds the report.

Natural fibres include plant-based fibres like cotton and linen, manmade cellulosic fibres (MMCFs) like viscose and animal fibres like wool, cashmere, silk and others and account for the remaining 35 percent of global fibre production. Of those, plant-based fibres make up 27 percent or 31.5 million tonnes, MMCFs 6.3 percent (7.3 million tonnes) and animal fibres 1.7 percent (2 million tonnes).

“While these fibres are often valued for their biodegradability and lower environmental impact, their production also raises concerns: natural fibres require significant amounts of water and fertilisers, pesticides and synthetic chemicals during farming and processing,” cautions the report.

Thus, completely eliminating synthetic materials would not be a viable solution, especially given the large volumes already in circulation and the aforementioned drawbacks of natural fibres. Also, products like mainstream sportswear and shoes require synthetic blends to achieve necessary qualities such as elasticity, moisture- wicking, and durability. While there are more sustainable and even biodegradable examples from On, Veja, Allbirds and Nat-2, they remain the exception.

“A more practical approach could centre on prolonging the lifetimes of existing synthetic fibres through reuse and recycling, while increasing the use of natural fibres”. In addition, one could increase the proportion of recycled plant-based fibres, thus reducing the environmental impacts associated with virgin fibre production.

Conclusion strategy one

“Our analysis reveals that this scenario negatively impacts all environmental metrics, except for material footprint and climate change. This is primarily because synthetic fibres are more efficient regarding water and land use, but less so in terms of CO2 emissions and material footprint. Substituting synthetic fibres with natural fibres (Scenario 1.1) leads to greater overall environmental impact reductions than using only plant-based fibres (Scenario 1.2), given the higher resource demands of conventional plant fibres. These findings highlight the trade-offs between materials and the importance of sustainable production practices across all fibre types,” is the verdict.

2) Increased garment durability

Another option is to increase the use of synthetic fibres to enhance garment durability, thus potentially lowering overall consumption and waste. Though currently only 13.6 percent of polyester fibres are made from recycled materials, advances in monofibre compositions and recycling technologies are improving, with monofibre designs simplifying the recycling process and making it easier to recover and reuse materials.

The model assumes a one-to-one substitution of virgin synthetic fibres with recycled or more durable alternatives. Envisioning different scenarios, in the moderate one, 25 percent of newly produced textiles would be made with monofibre synthetic fibres, accompanied by a 20 percent reduction in overall textile consumption. In the optimistic scenario, 50 percent of new textiles would be made with monofibre synthetic fibres, leading to a 30 percent reduction in consumption, while the ambitious scenario envisions 75 percent monofibre synthetic fibres and a 40 percent reduction in consumption.

Conclusion strategy two

“This scenario is the most effective in reducing textile and apparel consumption. Extending the lifespan of garments, whether they are made from synthetic or natural fibres, has very positive environmental impacts. While synthetic textiles show significant potential for durability and lowering material demand, similar outcomes can also be achieved with MMCFs like viscose, derived from wood pulp. … However, while synthetics perform well in terms of material efficiency and CO2 impact, concerns about microplastics—an issue not captured in our impact categories—highlight the need for caution in promoting them,” finds the report.

3) Sustainable production of natural fibres

In this strategy, the keywords are regenerative agriculture and organic production to lower water and chemical use as well as carbon emissions. “Regenerative agriculture enhances soil health, biodiversity and resilience to extreme weather while supporting local communities. Sustainable techniques like no-till farming, efficient irrigation and organic production can help lower resource consumption,” states the report.

Options here could be organic cotton, which can reduce GHG emissions by up to 46 percent, or hemp, which uses 50 percent less water and pesticides than cotton. MMCFs like Tencel Lyocell and Modal fibre use processes that reduce emissions and water use by at least 50 percent. “Next-generation MMCFs derived from waste streams provide additional sustainability benefits by reducing waste and dependence on traditional raw materials,” adds the report. However, here, it needs to be guaranteed that waste streams of the textile and garment industry are utilised and not those of other industries, the food industry for example.

Projected reductions for cotton include 46 percent lower GHG emissions, 62 percent less air pollution, 91 percent reduced water use and 30 percent less nitrogen and phosphorus fertiliser use, with a 14 percent increase in land use. In the moderate scenario, 20 percent of cotton would be grown organically, increasing to 40 percent in the optimistic and 60 percent in the ambitious scenario.

Conclusion strategy three

The outcomes of this scenario are modest because not all environmental impacts could be modelled for cotton. “The limited overall impact for all natural materials highlights that reducing production and consumption has a greater effect than improvements in material efficiency alone. Additionally, the results are constrained by the limited scope of the natural fibres included in the analysis and a lack of data on potential reductions in impacts for certain areas,” finds the report.

4) Embracing slow fashion

To stem the global consumption of garments and footwear, which is said to increase by 2030 by 63 percent, from 62 million tonnes in 2022 to 102 million tonnes, this scenario envisions slow fashion as the solution, namely producing fewer clothes that last longer along with mindful consumption.

“On the supply side, reducing the number of fashion collections brands release and adjusting production volumes can help align output with actual market needs, minimising unsold products,” predicts the report. “On the demand side, promoting reuse, repair, clothing libraries, rentals, donations and do-it-yourself fashion extends garment lifespans and reduces consumption.”

In a moderate scenario, unsold stock would decrease by 25 percent, lowering it to 22.5 percent of total output. In an optimistic scenario, unsold stock would decrease by 37.5 percent, bringing unsold items to 18.75 percent, while the ambitious scenario envisions a 50 percent reduction, lowering unsold stock to 15 percent. “Alongside fewer unsold clothes, a decrease in overall sales is assumed to help mitigate overproduction,” adds the report.

On the demand side, predictions vary between 2.5 percent reduction in overall consumer textile consumption in a moderate scenario to 3.75 percent (optimistic scenario) up to 5 percent in an ambitious scenario.

Conclusion strategy four

“This scenario, although only focused on clothing, highlights that reducing production and consumption is an effective strategy across all impact categories. The Circularity Metric increased due to the scenario’s direct impact on reducing textile consumption by households. … Scenario four further models both supply and demand-side decreases, reinforcing the importance of a holistic approach,” is the consensus.

5) Advancing circular manufacturing

This scenario focuses on improved material efficiency, thus avoiding increased GHG emissions, waste and fabric loss due to imprecise cutting, pattern layout mistakes and manual errors all seen in traditional textile manufacturing.

Instead, computerised systems and laser cutters that follow the contours of digital patterns can (and have) significantly reduced fabric waste. Additionally, “nesting software can be used to arrange pattern pieces in the most efficient layout, further optimising fabric use by fitting the pieces together like a puzzle, leaving minimal gaps and reducing waste,” according to the report.

At the design stage, computer-aided design (CAD) software allows for digital pattern creation and direct transfer to cutting machines, thus eliminating manual errors and enhancing precision. CAD integration also enables quick adjustments and optimisations, thus reducing fabric waste during production. “Moreover, adopting lean manufacturing principles helps eliminate waste throughout the entire production process by streamlining workflows and reducing non-value- added activities,” finds the report.

With modelling that assumes average processing losses of 26 percent for yarn-to-fabric and fabric-to-product stages in apparel manufacturing and 14% in textiles (excluding fibre-to-yarn processes) a moderate outcome would be 25 percent reduction in losses, an optimistic one a 50 percent reduction and an ambitious one 75 percent reduction in losses.

The dyeing process could also be streamlined: While traditional dyeing methods can consume up to 150 litres of water per kilogram of fabric, innovations like supercritical CO2 dyeing eliminates water use and cuts energy consumption by 80 percent. Air dyeing drastically reduces or eliminates the need for water in the dyeing process altogether.

“Similarly, digital textile printing uses precise amounts of dye and ink, significantly reducing waste, water, and energy consumption compared to traditional methods,” finds the report. In addition, the use of biodegradable chemicals for dyes, detergents and finishes helps minimise pollution.

Conclusion strategy five

“To reduce wasteful manufacturing processes and the environmental pollution associated with the textile industry, substantial investment in advanced machinery and technology is crucial. However, these technological improvements come with trade-offs in material environmental impact categories. Similar to the dilemma of replacing a washing machine with a more efficient model versus extending its lifespan, adopting new technologies may introduce environmental costs that must be carefully evaluated to ensure truly sustainable practices within the industry. Notably, the impact on the Circularity Metric is zero in Scenario 5.2, as the scenario primarily focuses on reducing waste rather than material use. This aligns with Scenario 5.1’s findings: reduced material, fossil fuel and water use are linked to a wide array of environmental impacts,” finds the report

6) Transforming regional supply chain dynamics

Nearshoring is the keyword in this strategy, tackling supply chains that are heavily globalised, with a large share of production being concentrated in Asia Pacific. Apart from ethical concerns in terms of labour practices and environmental regulations, long-distance transportation contributes significantly to the industry's carbon footprint.

“Localising production helps reduce emissions by cutting transportation distances and shortening supply chains, making the industry more resilient to disruptions like pandemics, trade disputes and natural disasters. This approach also boosts local economies by generating jobs, enhancing skill development and attracting investment in related sectors. Closer proximity to production centres fosters collaboration between designers, manufacturers, and researchers, leading to higher product quality and faster innovation,” advises the report.

The scenario explores potential benefits of shifting production from Asia Pacific to the US and Europe while promoting more localised consumption across all regions, assuming that raw material prices remain consistent across regions for modelling purposes. A moderate scenario envisions a 10 percent production decrease in Asia Pacific and in increase in the US and Europe by 5 percent; an optimistic one a 15 percent decrease and a 7,5 percent increase, and an ambitious one a 20 percent decrease and a 10 percent increase in production in the US and Europe.

Conclusion strategy six

“The primary reduction in impact stems from the fact that production in the US and Europe is cleaner and less material-intensive than in Asia. However, there are trade-offs to consider, particularly regarding the increased demand for production facilities in the US and Europe, which would lead to additional raw material extraction. It is also important
to note that this scenario does not address the potential negative social and economic effects of localising production in the US and Europe. For instance, if major parts of textile production were to move from countries like Bangladesh to Europe, it could have significant consequences for workers in Bangladesh and the country’s economy as a whole, as the textile industry is a major contributor to its GDP and employment. However, these considerations are beyond the scope of this analysis as the scenarios presented are purely hypothetical and intentionally modelled outside of real-world constraints,” sums up the report.

“The textile and fashion industry can considerably reduce its environmental footprint through circular practices. However, this transition will impact the livelihoods of the 140 million workers employed in textile supply chains. Ensuring a just transition for these workers should be a top priority for both governments and businesses,” comments Hilde van Duijn, managing director of the Circle Economy Foundation, in a press release.

Conclusion

As outlined in the latest Circularity Gap Report, individual strategies can make significant contributions to environmental impact reduction but fall short in terms of significantly improving the textile industry’s circularity.

“The findings … emphasise that the path to greater circularity requires the textile industry to undergo a complete transformation. This transformation must prioritise a drastic reduction in virgin material use and a shift toward secondary materials,” concludes the report.

In particular, it highlights four core circular strategies to drive meaningful, systemic change:

• 1) regenerating material flows by designing products for circularity
• 2) narrowing material flows by reducing production and demand
• 3) slowing material flows by extending product life
• 4) cycle material flows by prioritising recycled materials over virgin resources

Needless to say, the transition to a circular economy will not be easy, nor will it take place overnight: “Going circular requires coordinated efforts across industry, academia, government and finance,” advises the report.

It report ends with four industry recommendations on how to effectively reduce the circularity gap, namely by cutting production volumes (keywords circular textiles and designs, extended product lifespans and fibre-to-fibre recycling), setting environmental boundaries beyond carbon reduction (keywords clean production and global environmental standards), ensuring a socially just circular transition (keywords fair wages and closing the gender gap) and coordinating action across science, technology, policy and finance (keywords global labelling standards, traceability and greenwashing regulations).

One question remains though, with the industry transitioning away from a linear model that is based on overproduction and overconsumption, how will it make money when consumers are buying fewer items that last longer?

“We supported this report to provide the textile industry with actionable insights. The report highlights the most impactful circularity efforts. While not a complete solution, circularity is a powerful tool for driving meaningful change. We hope these insights will support industry-wide transformation, benefiting both people and the planet,” comments Christiane Dolva, head of innovation, research & demonstration at the H&M Foundation, in the press release.