By Silvia Forin, Eveliina Hylkilä, Annu Markkula, Essi Paronen & Hanna Pihkola. VTT Technical Research Centre of Finland
Innovation, circularity and sustainability
Are innovative business models always more sustainable than traditional ones?
Not necessarily. Ride-hailing platforms like Uber, for example, though representing a business innovation, increase traffic congestion and emissions in urban areas, encourage car use over public transport and rely on workers with limited labour protections. Also, fast fashion has innovative characteristics, such as short design-to-shelf cycles and the use of real-time sales data, but impacts people and the planet negatively through overproduction, waste and poor labour conditions.
And what about circular innovation?
Recycling, the most widespread circular solution, can be very energy-intensive and produce, in the case of plastics, toxic by-products. At the same time, circular models like avoiding (over)production, reusing, extending product life cycles, and product-as-a-service can reduce the need for virgin materials and energy. Still, only knowing the exact use scenarios and life cycle parameters allows for well-founded answers. In addition, when analysing a product’s or business model’s sustainability performance, it is crucial to define which sustainability aspects are being considered. A repair service may decrease raw material consumption but use cheap labour to be profitable. Therefore, it is crucial to identify the material, i.e. relevant, sustainability aspects to be optimised.
It sounds complicated.
Yes, but the task can be simplified. It is possible to take one sustainability aspect as a starting point and then continue the sustainability journey by analysing other ones.
This is what we did in the CRAFT-IT project. We selected climate-related impacts as a sustainability focus. We conducted exemplary calculations for different products linked to circular and sustainable business models in close collaboration with four European micro and small companies, representing textile re-use and re-design, clothing pre-order, and second-hand and take-back models.
We conducted interviews with the companies to investigate their products in detail, trace back raw materials and components, and model the production technology. We dived into literature data and searched databases, calculated and analysed.
To understand the mitigation potential of these alternative business models, the models were benchmarked against a potential conventional (e.g., linear) one. These comparisons were based on assumptions, but provide an indicative magnitude of the mitigation potential.
Insight 1: Reusing production waste can cut production-related emissions by up to 90%.
The reuse business model
The company transforms post-production textile waste—known as deadstock—into clothes, streetwear, and accessories. By creatively piecing together small fabric scraps, they minimise waste and maximise material use. Their zero-waste store and collaborations expand their reach, while partnerships with factories and donors fuel their mission. Committed to transparency and compliance, they’re also empowering local communities through hands-on workshops in circular skills.
The case: Bum bag made from reused textiles
The study evaluated the cradle-to-gate climate impact of a bum bag made in Iași, Romania, using local pre-consumer deadstock fabrics and primary components (webbing strap, triglide, side release buckle) sourced from China. Treating the re-used textiles as burden-free, we found that:
- 72% of all climate impacts are related to the primary components used
- 10% of emissions were caused by transport, half thereof related to deadstock materials
- Relying solely on deadstock materials can slash climate impact by up to 90% compared to using only new resources.
Mitigation potential and trade-offs
Reusing deadstock and unsold garments dramatically boosts resource efficiency, potentially reducing production-related emissions by up to 90%. Growing zero-waste efforts could reduce deadstock, spurring more innovation in circular fashion.
Insight 2: Producing clothes based on pre-orders can lead to 20% lower climate impacts.
The pre-order business model
By producing items only after receiving customer orders, the model aims to avoid the 21% of textile products that typically remain unsold. Waste reduction is pursued throughout the whole value chain: returned items are resold through the company’s platform or other channels. The company puts this into practice by leveraging a powerful online sales platform and setting up a strong cooperation network with production companies and logistics partners in Europe.
The case: Cradle-to-doorstep assessment of pre-ordered jeans
The study evaluated the climate impacts of a pair of jeans, from raw materials extraction (organic cotton), through production (weaving, dyeing and finishing, taking place in Portugal) until delivery to the client. Our findings:
- 65% of the cradle-to-doorstep climate impact is related to raw materials and jeans production
- The transport to clients was responsible for 10% of emissions
- One-fifth thereof are expected to occur due to the company’s no-waste policy, i.e. originate from returning goods and selling returned goods to further customers.
Mitigation potential and trade-offs
By producing items only after receiving customer orders, the model aims to avoid the 21% of textile products that typically remain unsold. The additional transport emissions emerging from reselling amount to less than 10% of the climate impacts avoided through the pre-order model and do not constitute a significant trade-off. This is an average figure. Companies should always consider that transport emissions strongly depend on the distance and the transport mode. From a climate perspective, the development of a national or continental market is preferable to an expansion overseas.
Insight 3: Choosing second-hand fashion only benefits the climate when it truly replaces the purchase of something new.
The take-back and second-hand business models
The second-hand and take-back business models aim to extend the lifecycle of garments and reduce the environmental impact of the fashion industry by promoting reuse and recycling, thereby minimising waste and the need for new production. The take-back model involves collecting used garments from customers and either reselling them as second-hand items or recycling them into new products. The second-hand model, on the other hand, consists of selling used garments to new customers.
Key factors to consider
In CRAFT-IT4SD, the climate effects of second-hand business models were analysed based on existing literature. The findings suggest that these models do not always offer a climate advantage over conventional garment purchasing. To determine whether a second-hand model can deliver climate benefits, companies should conduct their own assessments. For reliable results, the following key aspects must be considered:
- Do second-hand garments completely or only partially replace the purchase of new clothing?
- How frequently is the garment used?
- Is the first user re-spending the earnings from selling second-hand garments in new garments?
- Is the environmental burden from the garment’s first use (partly) attributed also to the second-hand garment?
- What is the distance the garment needs to travel from the first user to the second, and what is the mode of transport?
The second-hand and take-back business models can have the potential to reduce the fashion industry’s material consumption by promoting garment reuse and recycling. These models can extend garment lifecycles, decrease new production needs, and minimise waste. However, it is essential to address the above key factors, like garment replacement, usage frequency, and logistics, to conclude when they can offer sustainable alternatives for the industry and consumers.
Key takeaways
All in all, circular and sustainable business models can offer potential pathways to reducing fashion’s climate footprint. Overall, reuse and recycling can lower overall waste and significantly mitigate climate change.
However, the effectiveness of specific circular business models depends on various factors, such as consumer choices and efficient logistics. Although continued innovation and collaboration will drive the scale-up of circular business models in the fashion industry, only after measuring their actual impacts can we claim whether the circular alternative is the more sustainable one, and to what extent.
References
Markkula, A., Forin, S., Hylkilä, E., Paronen, E., Pihkola, H. & Tuovila. H. (2025) Climate impact assessment of current business models in the pilot sites. CRAFT-IT4SD project report D5.2.