
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 ‘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 the hourly wage in a Bangladeshi clothing factory to be 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 by the fashion industry.
Instead of manufacturing high-quality clothes with a long lifecycle, it is more profitable for most of the industry to keep people shopping for new items by constantly updating their ranges and outdating consumers’ wardrobes. 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 to be 10% of the world’s greenhouse gases, according to the European Environment Agency. Many clothes end up as waste due to the clothing industry’s systemic problem of overproduction. In addition, there are many negative social issues, such as poor working conditions in garment factories.

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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.
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 appetites.
There are several business models that 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 $35bn and set to grow in double-digit percentages over the next few years.
- Considerate purchasing/slow fashion – consumer focus on product quality and longevity 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’ lifecycles 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, looking to provide fast and fashionable clothing, yet limiting negative impacts due to a focus on high quality and local production. It uses technology to scan a customer’s body 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, is much preferable to the prevalent hit-or-miss fast fashion, and 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 damaged clothing.
Within our ‘Enabling Healthier Lifestyles’ theme, a core position is On Holdings, a Swiss sports brand founded in 2008 that focuses on performance training shoes. While the company is well-positioned to benefit from the trend towards people’s greater focus on sports and activity, it has also developed its brand to emphasise sustainability as well as performance. It constantly innovates to improve quality and reduce the impact of its products. This includes a resale platform for used goods called Onward, and a subscription product service called Cyclon, which aims for 100% recycled or organic cotton and 100% recycled polyester and polyamide.
Another impressive company 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 $1.5bn, with plenty of potential to grow further generating healthy investment returns. Winmark extends the lives of clothing by buying high-quality second-hand items for cash and reselling in the same store, frequently from and to the same customer. This both extends the 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 circular – 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.
Peter Michaelis is the head of the sustainable investment team at Liontrust