As fashion apparel retailers and brands continue to work toward greater circularity, research from Kearney shows the industry needs to do better.
The research is based on Kearney’s CFX Index, which measures seven elements of circularity aimed at extending the life of apparel and related products. The data ranks apparel retailers and brands, and the results are presented in the firm’s circularity report.
In its third iteration, this year’s report, titled “The Kearney CFX 2023 report: consumers don’t know, and brands don’t act,” reveals that while there is progress on circularity, much more work needs to be done.
The report concludes that not only do consumers need to be better educated, but brands need to break free from making short-term, fiscally driven investments in sustainability and circularity. Instead, the report’s authors say apparel brands must make significant investments with outcomes paced five to 10 years out.
It’s not going to be easy. But the Kearney analysis spotlights why action is desperately needed. The report’s authors note that their research “demonstrates that while solutions are there, adoption is not. Out of the 200 brands [analyzed], only 19 scored at least five out of 10. This is simply not good enough to significantly offset the industry’s environmental impact.”
The release of the report arrives as retailers and brands face deadlines for next-phase sustainability goals and are looking for strategies to deploy. Aside from the CFX Index ranking, the 19-page report includes best practices and case studies and an appendix featuring executive Q&As from solution providers as well as industry-leader Patagonia. Brian Ehrig, partner out of Kearney’s New York office, was the lead author of the report. He said the CFX Index included additional brands this year and focused on primary and secondary apparel markets.
Ehrig told WWD that with the primary markets, “we assess a brand’s performance around the use of recycled materials, availability of repair, the extent of care instructions, and how prominently they communicate circularity measures. On the secondary markets, we look at the breadth and depth of both secondhand/resale and rental, and how easy they make it to enable recycling.”
For consumers, though, many still don’t know that apparel can be recycled, which is why they end up donating it or giving clothes away. The report also noted that, “Similar to post-consumer products, pre-consumer products (unsold stock) and textiles (scraps) also aren’t making their way back into the circular supply chain to the extent they should — again no surprise given that there are numerous barriers, in terms of infrastructure and technology, to overcome.”
The report’s authors said on the infrastructure side, “the clothing drop-off and collection infrastructure is underdeveloped. Even sorting is complex and expensive because fashion products are not designed to be disassembled into sub-components for reuse.”
With technology, the report stated that mechanical and chemical recycling “are still in their infancy, and both are expensive. Mechanical recycling is more developed, while chemical recycling is just starting to gain traction. Other value chain partners such as equipment manufacturers are trying to adapt their machines toward re-/upcycled materials.”
Kearney included an interview in the report with Franziska Haefeli, vice president, head of marketing and systems, business group machines and systems at Rieter, who goes into greater detail about the state of technology.
When asked if he was surprised by any of the results, Ehrig said with this year’s report, his team “wanted to do an even more comprehensive look at the industry. We expanded the number of companies we looked at from 150 to 200, and I really thought through that process we would uncover more brands with higher rankings, but the top ten only saw one new entrant: Madewell.”
Ehrig said the analysis does show improvement year over year, “but the pace of that improvement is neither fast enough nor as extensive as it needs to be.”
By way of example, on circularity, Ehrig said the “greatest progress we have seen is in increasing use of recycled materials and providing detailed and easily accessible care instructions. But much of the attention goes to the secondhand market, which is exciting, but still very small.”
Ehrig said with sustainability, the top three core topics are human rights, sustainable raw materials/products, and then climate change.
“One of the reasons it’s so challenging for most of the fashion industry to make improvements is it is not vertically integrated, meaning they have little control outside of design and physical distribution/selling, and so much of the upstream value chain is opaque and out of their hands,” Ehrig explained. “I would argue that until fashion companies take more responsibility for orchestrating their upstream value chain, they will continue to have slow progress in improvement in these areas.”
So, what else would it take to move the needle on sustainability and create greater circularity? Ehrig’s response was blunt, and he said there are “so many actions needed.”
“But if I had to pick a major theme, it would be to make bigger investments in solutions with outcomes three to five and five to 10 years out rather than the typical Long-Range Plan (LRP), which tends to focus more on one- to three-year financial metrics rather than sustainability metrics,” Ehrig said. “What are some examples of investments? Fashion companies typically have little to no R&D budgets and are typically not set up to think about long-term business and technological change. To create circular materials, they will need to make investments that are long-term in nature, potentially with little, short-term payback.”
Ehrig quickly noted that not all the investment is needed in R&D. “For example, they need to prioritize the collection of used goods to prevent them from going into landfills and to enable the creation of the recycled feedstocks,” he said. “Taking it a step further, if they can control more of the supply to create a steady flow of materials, then they can work directly with the recyclers, the yarn spinners, the fabric mills, to take end-to-end responsibility and make more of an impact.”
When asked what executive leadership at fashion apparel brands needs to do to improve their CFX score, Ehrig said assessment of circularity efforts and each of the seven levers is the first step. “It’s quite straightforward to do, although I wouldn’t oversimplify how difficult some of them can be to implement,” Ehrig said. “For example, we found that three-fourths of companies offer limited or no repair or maintenance for their products. Each brand could assess what products are candidates for repair and begin incremental steps to make this service available or find third parties to work with that could do it on their behalf.”
Brands also need to increase awareness among their consumers that circular options are available. “That was one of the other major findings of this year’s study and went into the title of the report: Consumers don’t know,” Ehrig said. “I would encourage leaders to go through each of the seven elements of the CFX and perform a self-assessment of where they want to improve. Or just call me and I’ll go through it with them.”