Circular business models provide a 700 billion US Dollar opportunity

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The Ellen MacArthur Foundation has revealed that circular business models in sectors like rental and resale have the potential for growth from 3.5 percent to 23 percent of the global fashion market by 2030. This represents a 700 billion US Dollar opportunity.

The current value of the rental, repair, resale and remaking sector is more than 73 Billion US Dollars. The foundation expects these circular business models will continue to grow as customers are increasingly motivated by convenience, affordability, and environmental awareness.

The foundation warns, however, that these models can lead to negative environmental impacts if they are viewed as an ‘add-on’ to traditional wasteful models. Fashion retailers may offer vouchers to encourage product take-back in order to increase production. Not all models are made to withstand multiple wears and cleaning cycles. This increases the likelihood that the model will not be economically and environmentally viable.

The foundation’s latest report, “Circular Business Models – Redefining Growth for a Thriving Industry”, shows that circular business models offer substantial potential for increased revenue and reduced production. However, the foundation only recommends that the circular economy be integrated into the system within which it is situated. Otherwise, clothing will end up in the landfill.

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Ellen MacArthur Foundation warns against circular business models that don’t always bring about environmental benefits

The foundation recommends four key actions to maximize the positive effects of circular business models, and realize their full potential for economic growth and better environmental impact.

It is time to shift to a business model that focuses on increasing product use, not just producing and selling more. It is important for businesses to reconsider how they measure success and encourage customers to choose its circular offering by providing enhanced customer experiences and carefully designed incentives.

Second, retailers and brands should design products that are more useful and last longer. To maximize the economic and ecological potential of circular business models, products must be designed to last.

The foundation suggests that fashion companies collaborate to create supply networks that can circulate products both locally and globally. Fashion supply chains that are currently designed to ensure a predictable flow of products need to be transformed through collaboration and the application of digital technologies into supply networks that can circulate products both locally and internationally.

Last but not least, invest in scaling various circular business models that generate income without producing new products. This foundation can help increase long-term economic and environmental opportunities.

It states that these models can be used to help fashion industry move towards a model of better growth where revenue doesn’t depend on production or resource use.

Marilyn Martinez, fashion initiative manager at the Ellen MacArthur Foundation stated in a statement that circular business models not only have huge potential to become mainstream but also provide better growth opportunities for the fashion industry. The production of clothing doubled between 2000-2015, and the average time that we wear clothes dropped by more than one third.

“Circular business model can help turn that around and create an industry that is thriving and takes on global challenges like climate change and biodiversity loss.”

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