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Risk of a Global Recession Looms Over the Future of Circular Innovation

Like many industries, the global denim industry is in survival mode as the COVID-19 pandemic forces business across the supply chain to shut down. And though businesses and consumers may come out of this crisis with new priorities and habits that are informed by an economic downturn, the Circle Economy would like to see sustainable, circular design remain in the fore.

For more than a decade, non-profit Circle Economy has worked to empower businesses and governments to accelerate the transition to the circular economy through practical and scalable insights and solutions. The global denim industry has been one of the key sectors on the organization’s radar. Through a partnership with The Alliance of Responsible Denim, Circle Economy has contributed to the development of a road map for scaling up post-consumer recycled denim—an initiative supported by players across the denim supply chain.

Along with providing training programs for R&D and CSR teams and offering fashion companies tailored support and assessments for their businesses, the organization is currently carrying out Switching Gear, a project that is guiding four apparel brands on a circular innovation process to help them design and launch rental and recommerce business model pilots by 2021.

Prior to the pandemic, Circle Economy textile program lead Gwen Cunningham said innovation in this space was moving forward with companies forming sustainability task forces and budgets to match. However, in the future, as companies begin to rebuild their businesses and adapt to a new normal, they will have to balance uncertainty with recovery and a consumer base that will be more aware of where their fashion is coming from and how it is made.

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“We believe that these circular solutions are needed now more than ever, as they look to future-proof the industry, and build systems that do more with less,” she said.

Here, Cunningham shares how she expects circular design to be impacted by coronavirus, and why brands should begin to consider circular concepts to move unsold goods.

Rivet: What effect will the coronavirus have on the denim industry’s focus and investment in sustainable technology?

Gwen Cunningham: On the short term, efforts should be directed to ensure the well-being, safety and security of employees and customers. And of course, in some cases, companies are putting existing assets, like their technologies and factories to use by redeploying them to produce masks and sanitizers, donating products to healthcare workers, etc.

A risk is that the recession, predicted to result from this crisis, will be a setback for sustainability efforts, as pressing financial stress constrains budgets and/or resources that are currently dedicated to sustainability, and priorities generally shift to restoring ‘business as usual.’

We already see that for the short term, brands are putting ‘non-essential’ sustainability projects on hold and budget constraints for corporate social responsibility and innovation. Departments are limiting new engagement in sustainability initiatives during these uncertain times. This is also understandable as some brands and retailers are hit very hard and will struggle to survive.

A hope is, however, that ‘business as usual’ has been irrevocably disrupted, and that this halt in both production and consumption will create a golden opportunity in the medium- to long-term to fundamentally reassess, and leap forward into a new system and new mindset.

Rivet: The cost of sustainability is a hurdle for some brands. Will brands slow down on sustainable products as they try to recover?

GC: It is impossible to predict just how long recovery will take, and what this recovery will look like. However, we know that before the coronavirus pandemic hit, consumer interest and demand for sustainable fashion was at a high. That consumer sentiment, and those values, could be either compounded or curtailed by the current crisis. Brands will be watching this closely.

Aside from the production of new products, many brands must also now deal with huge volumes of pre-consumer unsold inventory. This stock, which is now lying dormant in stores, warehouses and factories worldwide, represents both a challenge and opportunity. Circular thinking and circular design solutions must be applied to capture its value. Any plans to develop new collections must be questioned, until the sustainable management of the current/soon-to-be-old collections are addressed.

Rivet: Will this crisis help raise awareness about sustainable manufacturing and circular products?

GC: The COVID-19 crisis is unveiling much of what was already broken in our economy, society and in our industry. For instance, a fresh light has been cast on the extreme vulnerability of the supply chain, as international brands rescind orders and employees across the entire value chain lose their jobs and income. Bloomberg reports that in Bangladesh alone, roughly $1.5 billion worth [of orders] has been cancelled due to the coronavirus outbreak, leaving many workers with less than a month’s severance, or in cases, nothing at all.

To the average consumer, now concerned with the supply and hygiene of the day-to-day goods that they used to take for granted, the question ‘where did my product come from?’ has never been more pertinent. The coronavirus is alerting us to our interconnectedness, and might help to raise awareness of, and consideration for, the many hands that make our clothing, and the social injustices that play out all along the fashion supply chain.

As a result of COVID-19 a global depression is forecasted, and so demand is expected to plummet. The impact of this economic downturn on the fashion consumer is unknown. A direct loss of income might equate to a renewed appetite for fast fashion, akin to the ‘post-war’ boom of the past. However, in the weeks, if not months, spent in isolation, the average person might begin to identify as a citizen rather than consumer, potentially detaching from the cycle of fast fashion and reflecting on its redundancy, in the greater scheme of things.

We are currently living the phrase ‘less is more,’ and learning first hand that it is true. Therefore, in the long term we could equally see a shrinking of expenditure, and a return to care, repair, and resale as consumers re-orientate toward platforms like ThredUp, United Wardrobe, Depop, which offer a sustainable alternative and value for money.

Rivet: What steps is the Circle Economy taking to help keep the conversation about circular fashion flowing?

GC: We continue to work closely with our partners along the entire value chain—whether collectors, sorters, recyclers, resale platforms, manufacturers or brands—and help them in building products, processes and business models that reduce their dependence on virgin, finite resources and eliminate waste.

We believe that these circular solutions are needed now more than ever, as they look to future-proof the industry, and build systems that do more with less. For instance, our Switching Gear project continues to run, which aims to practically accelerate circular business models in the industry by guiding four apparel brands in the design and launch of a resale or rental pilot by 2021.

And our training program On Course enables brands’ teams to innovate for circularity. For example, building capacity for circular design strategies, which could be utilized to upcycle current pre-consumer stock.