Global supply shortage and supply disruptions, geopolitical tension, and inflation yet again are challenging the business. For years companies are looking for alternative ways of being sustainable. Circularity is one of the options and the shift is on its way. Many companies are already now investigating their options in how to extend their product’s lifetime through recycle, repair, and reuse. According to Bain, executives plan to double the share of revenue from circular products and services by 2030 (Bain, 2022). Market’s newcomers also keep the business on their toes. The need for sustainable initiatives is hard to exaggerate. Leaders realise that well-designed circularity initiatives not only give sustainability points, but can also boost growth, cut costs, and build resilience.
One of the market newcomers, who is incorporating circular fashion into their business model, is Cecilie Bahnsen. People Integrated decided to investigate the topic of circularity with the help of Kristine Hannah Løbner, who is the Managing Director at Cecilie Bahnsen.
Cecilie Bahnsen has entered the Danish fashion scene in 2015 and operates at the intersection of couture and ready-to-wear to create luxury clothing with a relaxed, timeless style. Unique fabrics are hand-designed each season by founder Cecilie Bahnsen. Her aim is to craft effortless clothes that last. Each collection builds on the previous one to develop a world of pieces that can be cherished for years, passed between friends, and reinterpreted and restyled to express the individuality of the wearer.
"Cecilie Bahnsen is known for being timeless and creating pieces that live outside of trends. To support the DNA of Cecilie Bahnsen we wish to introduce business models that extend the lifetime of each product and highlight the timelessness and quality of each garment. We believe this will create value for our customers, build brand loyalty and draw the millennial and Gen Z consumers who demand more sustainable shopping options."
K. H. Løbner
Every change comes with a portion of resistance and challenges. Circular initiatives are not an exception and there are couple of common obstacles. One of them is an internal alignment across business functions. How do one prioritise circularity compared to other initiatives? Circularity tends to stay higher on the priority list at sales, marketing, and finance executives compared to their peers from operations and supply chain. Another stumbling block is an underdeveloped circularity system of peer companies, suppliers, technology, and regulators. An ecosystem, that shares the common goal, is a crucial foundation for the shift towards circular strategy. Priorities on competitive advantages and fear of cannibalizing new products and sales also break progress. When people hear sustainability or circularity, many think recycling. Here lies a less explicit obstacle - the fail to look beyond recycling. Every stage of a product life cycle presents its opportunities for circularity (Fig. 1. Bain, 2022).
Figure. 1 Circular opportunities across a product line.
Future business depends on business abilities to incorporate circularity into existing products. Initiatives might include:
- switching to renewable and recycled inputs like organic cotton, innovative fibbers of natural products and recycled wool and polyester;
- developing circular product design;
- extending product life through buyback programs, repair, remanufacturing, and resale.
Cecilie Bahnsen has created an Encore collection using the deadstock material from past seasons to create one-of-a-kind pieces.This initiative does not match the definition of circularity, but it does help the company to minimise the waste by giving life to precious fabrics in small meters that can not be used in production. All products are made-to-order, ensuring no garments in stock from this collection. This way Ruth Floral-beaded Cotton Dress leftover materials became an exclusive Gaia pillow by Cecilie Bahnsen.
“Our fabrics are so precious, they need to be used. We have never thrown anything away. We have it all here in studio in Copenhagen, every last scrap. There are so many wins about making these small collections. It gives the fabric a second life and means that we never have to send anything to landfill.”
"Our Edition collection uses QR codes that are built using blockchain technology that allows the customer to register their specific product and view their garment’s journey. We plan to explore the potential of this technology further to give our garments the longest life possible through re-sell and repair. Our sourcing team is working closely with our suppliers to increase our use of recycled materials throughout our collections and investigate how we can ensure our products can be repurposed if re-sell and repair are not an option."
K. H. Løbner
The research shows that while sustainability influences only 24% of consumers in their wardrobe choices, 46 % of customers are concerned by products future at its end of life (Fig.2. McKinsey, 2022(1)). This shows that there is a fruitful soil for the brands circular initiatives at the “Use” stage like repair and share. Nearly every second customer is looking for opportunities and established channels to prolong their products lifetime. Scalability and repeatable models are pivotal to ensuring the success of these initiatives.
Figure 2. The influence of sustainability on customers behaviour.
Fashion industry as well as consumers are paying more attention to sustainability with every coming year. Consequently, circular strategy being a part of company’s sustainability initiatives can help companies communicate to consumers. Similarly, to the UK market Danish customers are as hypermodern and with a rising concern for the environment. Both markets experience the increasing presence of the Millennials and Gen Z customer groups. These consumers are reaching the income level that affords showing eco-conscious values in their wardrobes. Experts point out that in the future sustainability will not even be an option. Sustainability will be a prerequisite of brand love and brand loyalty (McKinsey, 2020(2)). McKinsey’s research shows that sustainable shoppers are evenly spread by gender and age, but often have an above average income (Fig. 3. McKinsey, 2022(1)).
Figure 3. Profile of respondents who agree or strongly agree that they go out of their way to buy clothes, footwear, or accessories from sustainable and eco-friendly brands.
Finding information on sustainability might a be a jungle for many customers. McKinsey’s research of UK market shows that customers rely heavily on brands websites, product tags and certification. The research shows though that there are some differences in age groups. Consumers under 35 years old tend to rely on online reviews, social media, influencers, and fashion magazines. While 35+ years old customers seek information on product tags and certification (Fig. 4. McKinsey, 2022(1)). Findings show that besides having multiply ways to inform the customers about brands sustainable initiatives, brands can communicate both before and at the point of sale.
Figure 4. Sources of information to understand whether a brand is sustainable.
We are about to launch a section on our website to share more about our initiatives and challenges. Our broader ESG work has been certified by Positive Luxury’s Butterfly Mark who we continue to work with to keep improving under best practices benchmarked by Positive Luxury and EU regulations.
K. H Løbner
Building a circular strategy can also mean shifting to a totally new consumption model. For fashion industry it can mean creating solutions for purchasing used products. It can also mean discarding the notion of purchase and introducing a service-based model (e.g. rentals, subscriptions). While building a circular strategy the product design is crucial and here are keys to circular friendly design (McKinsey, 2022(2)).
R&D and Design: In a circular model the design team creates an ecosystem of production, distribution, purchase/rental and use, that is complemented by the products end of life application: reuse, resale, refurbishment, disassemble, reclamation.
Sustainable Material Sourcing: to upgrade to a circular system using recycled or recyclable material is not enough. Brands need to rethink the product itself, its packaging, and the way of shipment.
Distribution and Providing Access: Miuccia Prada once said "What you wear is how you present yourself to the world, especially today, when human contacts are so quick. Fashion is instant language." Customers do not buy just a piece of clothing; they buy a feeling they want to portray to the world. According to Miuccia Prada customers are buying a message. Fashion brands could benefit from remembering that while rethinking the value they are providing and that customers are willing to pay for.
Use and Reuse: Reuse and repair are as important experiences as purchase and use. As we have shown before McKinsey’s research proves that. To assist customers in fulfilling their wish to prolong the products life circle the circular system must be designed to be easy, accessible, and rewarding. Experts mean that there are number of ways to improve circular customer experience: return pick-up service, customer wardrobe tracking, bidding service, resell assistance. Miriam Lobis, a partner at McKinsey’s, came with a following suggestion, that surely requires technological backup. “Imagine that your style adviser tells you, “You haven’t worn these blue shoes in a while. Don’t you want to resell them?” Then, instead of having to position them in a nice spot and having to take photos and think about the description, [an online platform] makes a perfect suggestion, saying, “Look, these are the shoes that you bought. These are some of the pictures of the original ones. Here’s the perfect description.” And it will just be 20 seconds, and your item is up on the platform. And once the wardrobes of millions of consumers are connected, your personal style adviser can actually find and identify the person for which these blue shoes would be the perfect addition to their wardrobe, so the reselling process will be done in a second. And that’s the moment when end of ownership really will be big scale.” Creating pleasant circular experience will automatically cause a mass customer participation, that will only strengthen the circularity (McKinsey, 2020(1)). Reuse is the circular initiative that is shortest in the production chain. Therefore, it is also where most value can be created.
Max Bittner, CEO Vestiaire Collective (the premium and luxury resale platform that counts more than ten million members worldwide) means that habits of Generations Z is a good indicator of the future consumptions, and they are big fans of buying and selling preowned clothes (McKinsey, 2020(2)). He also means that fashion industry could benefit from replication the traditional offline shopping experience (the social aspect of it) into an online experience. Brands have to nurture the global community, and create the process of resell that is fun, engaging and social: e.g chats, fan groups, online forums, and other tools that raise emotional connection.
"We are striving to close the loop, encourage our customers to care for their garments and inspire them to buy better through rental, repair and resell. Today we work with a selected range of partners on Rental model and study the possibility of taking this in-house. Partners include Rent The Runway (US), Hurr (UK) and Renaisa (FR). Furthermore, Cecilie Bahnsen's Recommerce platform is set to launch in the 1st half of 2023. Together with Rental we forecast these initiatives to make up 6 % of the total turnover in 2025."
K. H. Løbner
Circularity and other industries
Circularity is also a hot topic in furniture industry, where manufacturers are already widely using sustainable materials. This includes recycled plastic, wood and metal or recyclable materials like concrete, cardboard, bamboo, cork and hemp. The next stage is taking a step further to a high-value circular resource flow.
Companies are facing though their industry specific obstacles. The migration from solid materials like wood and metal sets a restriction to a product’s potential second life. Weak design limits or excludes product’s reuse of components, repair, reuse and recycling. Hazardous substances, used in the production, cause challenges and additional costs for recycling. Customers education on how to take care of the products to prolong their life span is not a common practice. The lack or cost of spare parts often encourages a new purchase. Another obstacle as weak incentives for furniture take-back programs cause underinvestment into the logistics development. High transport and labour costs in many parts of EU also make repair and refurbishment costly. Furthermore, the price difference between new and second-life furniture is not significant enough to lead to a sustainable consumption on a wider scale, that would include private and commercial sectors. Lastly, furniture reuse is underprioritized compared to recycling. This limits the potential of the furniture circularity overlooking its “Use” stage (see Fig.1 Circular opportunities across a product line).
To overcome these barriers, the industry needs the infrastructure for collection, sorting and reuse of the materials. This can be a part of mandatory producer responsibility or voluntary industry agreement. The return to eco-design would significantly extend the furniture lifespan directly and would contribute to its ability to repair and remanufacture.
Furniture industry is already taking the first steps towards circularity. Multiple wooden furniture manufacturers began using creative ways to utilise every single scrap of this scarce resource in the production. For example, larger pieces of solid wood residue are crafted into home accessories and home decor. Sawdust is being repurposed in a district heating plants.
Circular economy and People Integrated
The playground of opportunities within circular economy expands every year. For brands being circular can bear unexpected fruits. A growing body of evidence show that many job seekers are attracted to organizations with sustainable practices. Why? Sustainability lifts companies market reputation and being associated with these companies contributes to employee's sense of pride. Being sustainable suggests that companies are generally concerned about the well-being of the society and are likely to treat their employees well. Lastly some candidates can connect with companies on a personal level as they share the same values. This attraction can be used as a competitive advantage. Drawing more applicants dramatically increase company’s chances of hiring a top performer.
Any change does not just happen. People make it happen. As circularity tends to be the future, companies already now must pursue the talents who can drive the change. Circular economy and circular products are challenging different professionals. Circular economy requires a circular supply chain design. Supply chain managers need to find ways to reduce demand for logistics, to create circular modes of transportation and recycling of waste materials and spare parts. Circular initiatives like reduce, reuse and recycle also require facilitation from the supply chain side.
Buying a used good or sharing it with others might be an obstacle for many customers. Returnable packaging requires more effort that a disposable one. Making circular products desirable and helping customers overcoming their habits, fears and preconception calls for the right way of communicating. Choosing the right platform is also a key. Stories on Instagram are helping to create engagement and relationships with the audience. Themed groups of Facebook can help create communities and to share content. Companies might use LinkedIn to build a certain image among professionals.
One of the circular company’s challenges is aligning incentives for performing economical and doing good sustainably, as circularity comes with an initial cost. This requires Finance departments to take a products/services life-cycle perspective and be an involved partner of the change, that brings multiple financial benefits. Circulating existing products and services, stimulating innovation of new products and services may create additional revenue. Distinguishing itself increases competitiveness and may strengthening relationships with customers and employees. Circular strategies may lessen the risks of a linear model (like scarce resources, fail to innovate and adapt).
As Millennials and Gen Z are getting older, the community of online shoppers is getting bigger. An increasing number of customers are not only shopping online. It is also a place where they look for the information, that influences their shopping behaviour. Therefore, digital experience is becoming a new must for Sales department. New approach to price setting for circular products is another must. Introducing new business model will require learning new customers and new sales techniques to approach them.
The move from a linear to a circular production model must not only be supported by the business initiatives. A strong and clearly defined governance system is required in order to make and regulate the change. Waste regulation, extended producer responsibility, collection program, data privacy needs to be adjusted to a new model.
The development of economy is natural and the circular initiatives are gaining traction in various sectors. Visionary leaders recognise the opportunity of removing the link between economic growth and using virgin resources. This vision stimulates innovation, growth, more resilient and agile business. The change from linear to circular products is a huge creative ground. Investments into innovation leads to technological development, innovative materials, energy efficiency and profit opportunities. The lower cost of the production through a more efficient input utilisation adds to the overall economic growth. Labour market will also feel this shift. Circular economy implies high quality recycling and high-skilled remanufacturing activities. The demand for entirely new business goes hand in hand with circular economy. Collection and reverse delivery, product resell / rental platforms, repair services will be gaining their popularity. Besides macro effects, circular economy benefits individuals. Prolonged products lifespan increases disposable income. Consumers are offered additional options or product quality. Last but not least the improved health conditions due to lower pollution and contamination.
Rome has not been built in one day. Neither does circular economy. The initiatives have to be mainstreamed and supported by systematic solution applied in scale.