Circular business models in fashion and the risk of rebound effect

In recent decades, the amount of clothing produced in the fashion sector has significantly increased, together with the waste generated.

Due to the drop in costs and the consequent increase in the supply of low-priced items, the number of items purchased per capita in the same period of time increased by about 60%.

At the same time, between 2000 and 2015, the number of times a garment is worn before being thrown away decreased by 36%.

Circular business models have the potential to reverse these trends without compromising the economic growth of the sector.

In fact, the adoption of circular business models in fashion (rental, resale, repair and remanufacturing) allow, on the one hand, to reduce the production of new garments, leading to a reduction in greenhouse gas emissions and, on the other, to develop new sources of revenue; by 2030, these business models are estimated to be worth $700 billion, 23% of the global fashion market.

However, the implementation of sustainability and circularity practices requires a systemic assessment that allows analyzing all the possible factors capable of positively or negatively influencing the environmental benefits that circular economy strategies can offer.

The rebound effect in the circular economy: what is it about?

The rebound effect occurs when the results envisaged by a sustainability strategy (in this case of circular economy) are not achieved.

In particular we are in the presence of CER (Circular Economy Rebound) if the improvement of the eco-efficiency of a production system is compensated by external systemic responses (for example behavioral changes of consumers, producers, logistical problems, etc.).

A common case of rebound effect concerns the energy market: when energy efficiency improves, prices decrease and, at the same time, demand increases, leading to higher net energy consumption (and worse environmental outcomes).

The fashion industry is very vulnerable to the ERC phenomenon, but it also has the tools to avoid it.

To avoid the CER in the fashion sector, it is necessary to implement actions and practices capable of reducing the rate of production and consumption, designing long-lasting garments and keeping materials and products in circulation for as long as possible.

Understanding the rebound effect could encourage the growth of truly sustainable actions without overestimating the environmental benefits offered by the practices implemented in the company.

To make this possible, it is necessary to analyze all the factors that can positively or negatively influence the environmental impacts generated by circular economy strategies in the fashion sector.

This is possible through the Life Cycle Assessment (LCA), a methodology that makes it possible to evaluate the potential environmental impacts of a product, process or service throughout its entire life cycle.

The Life Cycle Assessment to identify the risk of the rebound effect

As previously mentioned, the implementation of circular economy practices in the company can guarantee various environmental benefits. However, the assessment of the environmental impacts of the new circularity strategies must be carried out by considering all those factors that could cause the rebound effect.

One of these factors refers to the lack of consideration and understanding of behavioral changes by consumers following the implementation of circular economy practices by companies.

In this regard, a study published by the scientific journal Environmental Research Letters compared, using the Life Cycle Assessment (LCA) methodology, the contribution to the impact category Global Warming Potential (GWP) or Climate Change Potential of 5 different scenarios on the management of the waist of a pair of jeans.

The study focused exclusively on the GWP impact category excluding other categories such as: use of water, toxic chemicals and waste generation.

This choice made it possible to make comparisons between the scenarios studied.

Such scenarios are:

• Basic: the user buys a new pair of jeans and, after using the garment for a certain period of time, gives it to a waste-to-energy plant
• Reduce: the user prolongs the use of the pair of jeans purchased. In this scenario, the environmental benefits are obtained from the non-production of new products
• Reuse: the user resells the item of clothing in a thrift shop which allows to slow down the consumption cycle and reduce the production of new products
• Recycle: the garment is subjected to industrial transformation processes into secondary raw materials. This results in a reduction in the usage rate of virgin raw materials;
• Share: the same pair of jeans is rented by multiple users during its life cycle.

The study was conducted with the aim of analyzing the phenomenon of the rebound effect in the scenarios listed above, in order to identify the specific areas in which behavioral changes must take place to reduce the overall impact on the GWP of the fashion industry.

In all scenarios, it was assumed that the user used the pair of jeans 200 times. Unlike the other scenarios, in the case of the Reduce scenario, the impacts deriving from the production and delivery process were not considered, assuming that, after 200 uses, the pair of jeans is still in good condition and can be further worn by the user.

Reduce and reuse, the business models that most reduce the risk of rebound effect

The study examined is important to provide an overview of the environmental benefits guaranteed by circular economy practices in fashion and all the factors that must be considered to avoid the rebound effect.

The results of the analysis suggest that the Reduce scenario allows GWP to be reduced to a minimum, followed by the Reuse scenario.

In general, the results of the study indicate that circular economy practices that extend the life cycle of materials and products (reduce and reuse) seem to have a much lower GWP than the other scenarios (recycle and share).

The risk of rebound effect increases for the recycle and share scenarios

As far as recycling is concerned, in fact, if on the one hand the use of virgin raw materials is avoided, on the other hand the industrial transformation processes of clothing items that have reached the end of their life cycle into secondary raw materials generate high emissions.

The Share scenario succeeds in intensifying the utility rate of a product, but there is a high risk that it will increase consumer mobility, which would translate into high extra emissions. In this case, the overall total GWP could be even higher than in the baseline scenario.

However, the greatest analytical uncertainties are present for the share scenario. For this reason, a sensitivity analysis was conducted in which 3 types of scenarios were defined:

• Share A: jeans are used 400 times instead of 200 times;
• Share B: the user uses low-carbon means of transport, such as a bicycle, to reach the store that offers rental services;
• Share C: Illustrates the combined effect of the Share A and Share B scenarios.

The sensitivity analysis shows that if the number of times the garment is used is doubled (from 200 to 400) and if the user uses low-emission means of transport, especially if the store is located relatively close to the consumer , the C share scenario can achieve approximately the same level of GWP as the reuse scenario.

It should be emphasized that the results depend on the assumptions made (number of uses of the garment, recycling technology, production impact of the garment, etc.) - the results of the study must therefore not be taken as absolutely valid, but more as a demonstration of the importance of carry out in-depth analyzes before defining the best strategy for reducing the environmental impact.

Conclusions

The fashion sector presents various environmental criticalities but, fortunately, there are solutions capable of dealing with them.

These include circular economy practices, on which, however, there may be the risk of a rebound effect, which could severely limit the environmental benefits offered by a "circular practice".

To analyze the risk of rebound effect and the real sustainability of circular economy practices in fashion, it is necessary to evaluate all those factors that can limit their potential environmental benefits.

According to the study, the most effective way to mitigate the environmental impacts of the sector corresponds to the adoption of "reduce" and "reuse" strategies, while as regards the "share" scenario, it can guarantee environmental benefits compared to the basis only if we consider a higher rate of use, the transport of consumers by means of low-emission vehicles and, therefore, the relative proximity of the store with respect to customers.

By changing the assumptions, the results change, and this shows us how sustainability is a complex issue that requires in-depth analyzes to define the best strategy in terms of environmental impacts and economic growth.

For this reason, we at Cikis offer multidisciplinary skills, to support your company in defining an ad hoc circularity strategy.