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$2 Trillion on the Table: How Digitized Circularity Helps Fashion Build Back Better

Fashion is a big industry—$3 trillion big—and that’s based on the linear take-make-dispose model that sends resources trundling down a dead-end path. Upgrade the sector to a digitized circular economy that monetizes end-of-life and recycling for material manufacturers, however, and the same value could nearly double.

That’s the conclusion Lablaco, a French blockchain-powered platform for circular fashion, reached after working with PwC, sustainable consultancy Anthesis, Wageningen University & Research and others to map out the different segments that could benefit from a more circular garment value chain, including fiber production, apparel manufacturing, digital fashion, 3D printing, packaging, product care, logistics and laundry. The report, published in December, estimated that the potential of all this could be as much as $5.3 trillion.

“Circular fashion is definitely really great for the environment in the world but it’s also an incredible blue ocean of opportunities,” said Lorenzo Albrighi, co-founder and CEO of Lablaco, said at a recent webinar organized by Canadian nonprofit Fashion Takes Action.

Digitization’s potential starts right at the beginning. Fiber collection and processing are enormously fragmented with “a lot of blending and re-blending,” said Amit Gautam, CEO and founder of TextileGenesis, a fiber-to-retail traceability firm based in Hong Kong and India. TextileGenesis deploys blockchain-based digital tokens known as Fibercoins to keep tabs on fibers, yarns, fabrics and garments as they wend their way through the supply chain. Though the company initially focused on viscose and recycled polyester—Lenzing, for instance, tapped the company in 2019 to boost the traceability of its Tencel and Ecovero fibers—TextileGenesis will soon be broadening its scope to include organic cotton and recycled cotton from textile waste.

Doing so is essential, Gautam said, noting that the textile industry has a 95 percent “traceability gap,” meaning that nearly the entire textile value chain has very limited to no visibility. This has important implications for end-of-life management. “If you’re not sure about the composition of the garment, then it directly impacts your circularity,” he said. “Every single recycling technology, whether it’s mechanical or chemical or biological, must know the composition of the fibers in a reliable manner, because your processes are tailored to that.”

TextileGenesis tags every pound of fiber it handles with a unique digital code at the point of origin, which, in turn, improves the accuracy of how much certified material is logged. The company requires no technology investment on the part of participating brands. TextileGenesis’s cloud-based platform is updated every time a node in the network—say, a spinner or dyer—captures the data from a transaction of fiber and uploads it to the system.

Natasha Franck, founder and CEO of Eon, says her tech firm powers connectivity in finished products in a similar way. By using a digital-identity protocol known as CircularID, the New York startup hopes to “bring each and every garment online” and create the “digital foundation for circular commerce in fashion and retail.”

“Basically we connect products from production through use, reuse, next life and beyond,” she said.

One thing driving the move toward digitizing products, noted Franck, who is working with Microsoft to “digitally twin” 400 million fashion products by 2025, is the sudden shift in consumption patterns that “brands are unable to service,” such as resale, which is projected to quintuple in market share over the next five years. Brands are also scrambling to address not only growing customer demand for greater transparency but also their desire for more sophisticated digital experiences, such as digital wardrobes and smart checkouts, that will pave the way for the “store of the future.”

While retailers typically have barcodes linking data to each product they sell, this information is stripped away at the cash register. “Without this product ID, brands can’t support the management of products to new business models like resale,” Franck said. “They can’t build ongoing connections with customers. Their relationship ends at point of sale. They can’t access data and insights post-sale. It is a black hole in terms of customer service and insights.”

The CircularID helps create what is essentially a product’s “digital passport,” one that is continually updated every time a dress or pair of shoes exchanges hands. It could unlock brand experiences or other types of services or business models. To provide minimum friction, Eon designed its platform to be compatible with enterprise inventory databases.

“What’s pretty exciting about this is that most product data—the data that you need to support the circularity of this product—already exists within a brand’s existing system,” Franck said. “And so we capture that data and enable the digitization of that product. We also enable that data to be shared with circular partners [that] need that data to fulfill their business functions. So, for example, Evrnu needs to know the material content of a pair of denim [jeans] to recycle it, or Trove needs data like the MSRP or original photos to facilitate resale for partners like Patagonia and Eileen Fisher.”

The pandemic, she said, has “sort of accelerated this to the point of being overwhelming,” particularly as fashion purveyors, feeling the sting of pulled-back consumer spending, see a wealth of untapped monetization opportunities—the same ones, in fact, that led secondhand sites like Poshmark and ThredUp to file for IPOs.

Today, Franck said, brands can only make more money by producing more goods. “Right now, when a brand sells a product, they don’t participate in a resale revenue; they don’t participate or benefit the more that product is used,” she added.

Gautam agreed there are more “tailwinds than headwinds” around digitization because of the current crisis. If anything, he said, brands are now even more conscious of where their products are coming from. “I think it has also accelerated the need for sustainability, because look what has happened with Covid-19,” Gautam added “You could say maybe it’s [because of] human and nature [conflicting], and it has accentuated the focus around sustainability and climate change within consumers as well.”

Forced labor has also become a critical issue, especially now the burden of proof that products are slavery free is shifting onto retailers.

“All those forces will drive higher level of traceability and transparency in the supply chain, and that ultimately would also help in terms of driving circularity because the material integrity becomes important as well,” he said.

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