Is the Textile Circular Economy out of touch with reality?

Since the publication of “A New Textiles Economy” by the Ellen MacArthur Foundation in 2017 textile circularity or the Textile Circular Economy have become a buzzwords. Indeed, the textile and fashion sector has become one of the poster child industries for which a switch from a linear take-make-use-dispose operating model to a circular concept in which materials and products are reused, repaired and recycled is being promoted. If you read the Wikipedia article on Circular Economy you find the textile industry as the first example in the chapter on ‘adoption and applications by industry’. But why is it then that 8 years after the 2017 EMF publication, one of its key findings that “less than 1% of material used to produce clothing is recycled into new clothing” remains as true today as it was back then? Why despite all industry pledges, policy initiatives, research funding, start-up investments and activism have we so little to show for. Is it just a question of time that it takes to change course for a super-tanker like the global textile and fashion industry or is there something fundamentally wrong or flawed with the underlying idea?

Let’s first look at what the concept of a circular economy really entails. The term is composed of two words ‘circular’ and ‘economy’. If something is circular it basically describes a shape or trajectory that always returns to its starting point, from which it can then go on another identical loop. In textile terms, pumping oil out of the ground, turning it into a polyester shirt which after a few wears and washes is returned back underground in a landfill, while representing some kind of loop, doesn’t qualify as a circular solution, because the molecules that make up the product are lost for the next cycle. Circular economy concepts also predicate that each product use cycle should be extended as much as possible through reuse, repair, refurbishment etc. with (molecular) material recycling being the last resort.

The word ‘economy’ points to the belief that such strategy of product life cycle extension and material recycling is actually economic, meaning that it creates more value than a rapid and complete disposal of the product at the end of its life and its replacement by a newly manufactured item. This assumes that the sum of all the costs of mostly labour and (some) energy that is employed in product lifetime extension and the loss of functionality of the older product is smaller than the cost of replacing the product or that a product made of recycled materials is cheaper than one of similar functionality that is made from costlier virgin materials which require more energy for processing and transport.

When the concept of the circular (or loop economy as sometimes called back then) emerged in the 1970s it was believed that the substitution of material and energy by human labour was a good idea. One of the key publications by Walter Stahel and Geniève Reday, originally undertaken as an EU-funded study in the late 1970’s and published in 1981 has the title “Jobs for tomorrow: the potential for substituting manpower for energy” (unfortunately unavailable in digital form). At a time of high energy and material cost inflation and high unemployment, this seemed to make a lot of sense. Just to give you an idea, from 1970 to 1980 oil prices increased from about $1.80 to over $36 per barrel, a 20-fold increase (!!!) of the cost of the most important economic commodity in just 10 years. During the same time, unemployment jumped from less that 5% to over 7% in the US and from about 2-3% to 6-7% in the EC.

The next 20-25 years then showed the exact reverse, oil and commodity prices were flat to down, while the US unemployment rate halved from a peak of almost 10% in 1982 to about 5% in 2005. Both in the US and the EU, labour costs kept going up steadily while costs of energy and material stagnated. As a result, the idea of replacing energy (and material) costs by labour was understandably not popular at all.

This changed again in the early 2000’s when prices of oil and many other commodities rose rapidly again, mainly explained by the massive resource hunger of the fast-growing Chinese economy. Oil quintupled from the $20’s in 2002-3 to over $100 in 2012-13, while steel prices quadrupled in the same period. The great financial crisis in 2008-9, followed in Europe by the sovereign debt crisis in 2010-13, led to spikes in unemployment. And sure enough, the Circular Economy idea made a revival, and quite a spectacular one, especially in Europe.

The already mentioned Ellen MacArthur Foundation, with heavy behind-the-scenes support by McKinsey & Co. launched a number of impactful reports, starting with Towards the Circular Economy: Economic and Business Rationale for an Accelerated Transition in 2013 in which it argued that a subset of the EU manufacturing sector, especially highlighting the automotive industry, could realise net materials cost savings worth up to $630 billion annually towards 2025. They found an especially open ear with the European Commission (yes, in pre-Brexit Europe UK-based NGOs could still play centre-stage roles in EU policy debates). In 2014 the EC published it’s Communication “Towards a circular economy: A zero waste programme for Europe”, leading to its 1st Circular Economy Action Plan presented in 2015, followed by an updated version in 2020 (as part of the EU Green Deal), which for the first time singled out textiles as one of 7 key sectors to be targeted specifically. How the textile and fashion sector in Europe was to be transformed was then laid out in more detail in the EU Strategy for Sustainable and Circular Textiles, published in 2022. The operational goal formulated in this document reads like this: “By 2030 textile products placed on the EU market are long-lived and recyclable, to a great extent made of recycled fibres, free of hazardous substances and produced in respect of social rights and the environment.”

Now 2030 is exactly 5 years from now, which begs two questions:

1.????? How likely is it that this goal towards which the industry has made no noticeable progress over the last 8 (or 15 or 30) years, can be reached within the next 5?

2.????? What should happen so that we at least start to make progress towards this goal?

As I explained above, the circular economy is not just about recycling, but also about product life-cycle extension. Circular economy purists such as Walter Stahel even insist that any recycling that isn’t “recovering pure atoms and molecules by industry for reuse by industry, and paid for by industry” should be considered down-cycling which isn’t part of a true Circular Economy. Very little of today’s textile recycling would meet this standard. ?

Since the EU Textile Strategy is quite strongly focussed on recycling, let us concentrate first on this aspect of the textile circular economy. I will come back to the important life cycle extension issue at the end of the article.

As we have seen, the circular economy only makes sense, if making a product/material circular is actually economic. And the interesting thing is, that if something is economic, people (or companies) spontaneously tend to do it, provided it is not somehow made impossible, such as outlawed. Since textile recycling isn’t outlawed, quite the contrary its is rather encouraged, but still doesn’t happen at any meaningful scale, tells us that it currently isn’t economic.

As we have learned above, the economics of circularity depend on the cost-competitiveness of the material, energy and labour inputs needed for making high quality recycled fibres out of post-consumer waste feedstock vs. their virgin materials counterparts. Making virgin textile fibres is actually quite cheap. For the major man-made and natural fibres types both energy and labour input is quite limited, definitely no comparison to the energy needs for smelting metals out of ores or making cement, glass or ceramics out of silica, clays and limestone. Fibre production has also become largely automated and textiles are light-weight making them cheap to transport across the globe. As a result, virgin textile fibres are incredibly cheap and have surprisingly remained so over long stretches of time.

Just take the example of cotton (chart below) whose price today is roughly at early 1970s level in nominal terms (!!!). No increase in 50 years, which means a massive depreciation in real CPI-adjusted terms. If we used the US CPI adjustment factor from 1970 to today, cotton should be 8x more expensive, so rather than $ 0.70 it should be above $ 5.00 per pound. No wonder global cotton production is struggling to grow.

For polyester the cost depreciation is even crazier. Since the early 1980’s prices have fallen by 80- 90% while the quality and functionality of the fibres has improved. In recent years polyester staple fibres have repeatedly traded below $1.00 per kg, significantly cheaper than a litre of petrol at an average European petrol station.

If we compare this to fibre recycling, especially from post-consumer waste, we first have to deal with relatively expensive labour costs (in Europe) for collection and mostly manual sorting. This is followed by decontamination and separation processes, which require some energy, some labour and depreciation of equipment. Then the actual recycling process requires some energy and equipment depreciation in the case of mechanical recycling and more energy, various solvents and larger equipment for chemical recycling. Finally, the conversion efficiency from waste feedstock to spinnable recycled fibre is rather low, producing significant amounts of useless or even toxic material waste streams whose management engenders further costs.

Now material cost is only half of the economic equation, the other half is represented by the value i.e. quality or functionality of the recycled fibre, which in the case of mechanical recycling almost by definition is lower than comparable virgin fibres and in the case of chemical recycling often is inferior or at least less consistent than virgin fibres. Finally the presence of dyestuffs or other problematic chemicals that couldn’t be removed entirely in the recycling process further reduces the reuse value of the recycled fibre.

Based on this, we can confidently answer the first question above. There is absolutely no way that textile-to-textile recycling will grow meaningfully over the next years, if the current comparative economics of virgin vs. recycled fibres persist. I’m obviously not the first one to come to this conclusion, but I still find it useful to state it as clearly as that.

Anybody who accuses industry for not investing more in textile-to-textile recycling today or for not using more post-consumer recycled content, fails to understand that many manufacturers along the supply chain or smaller brands in this industry operate on such slim margins that they simply cannot make such uneconomic decisions and that managements of larger brands with more comfortable margins would at least get into conflict with their fiduciary duties.

Moving on to question 2, what should happen that textile-to-textile recycling becomes are more realistic option?

I see 3 main levers:

(1)? Making the use of virgin materials more expensive. Levies, tariffs, modulated EPR fees or carbon taxes are all possible means of achieving this and have been discussed to some extend in policy debates. They obviously have the downside of making textile products, which will remain for a long time mostly made of virgin materials, more expensive. This is especially problematic for consumers with limited means.

(2)? Subsidise textile-to-textile recycling through use of EPR fees to cover costs of collection, sorting and recycling, direct subsidies to textile recyclers for capital investment or operating costs, payments per volume of waste recycled or tax breaks. On the demand side, products made with/of recycled fibres could benefit from reduced VAT or favourable treatment in public procurement. This is common practice to induce desired investments and sustainable consumption or business practices across major sectors of the economy such as renewable energy, electromobility, sustainable agriculture etc.

(3)? Creating artificial market demand for textile-to-textile recycled fibres by stipulating a mandatory recycled material content percentages for textile products put on the EU market or mandating recycling quotas for end of life products. Also this is something that exists in other markets such as food packaging, old car recycling or management of hazardous waste.

Other less directly impacting measures could be the creation of a more accessible and efficient post-consumer waste collection infrastructure, consumer education campaigns, product labels or passports, selective facilitation of waste and secondary raw material trade and logistics, separation of textile fractions from mixed municipal waste streams.

We will also need to close loopholes and unwanted short-cuts such as the exclusive use of (non-European) post-industrial waste as feedstock for recycled fibres or the continued use of bottle rPET for recycled polyester. We also need to ban incineration or landfilling of recyclable waste fractions and restrict export of textile waste for such purposes.

In the end, we will need a multi-pronged approach of interlocking regulation and smart incentivisation that in combination can turn around the current massively unfavourable economic situation of textile-to-textile recycling compared to virgin fibre production and use.

And no, by 2030 the majority of textile products on the EU market will not be recycled and won’t be made of recycled materials, but if the political will can be mustered and all the tools and means are smartly brought together in the next 2 years, we may start our journey seriously in 2028 so that from the early-to-mid 2030s textile-to-textile recycling becomes a scaled economic activity and by 2040 some 20-30% of materials used in new textile products sold in the EU are on their 2nd loop.

If we achieved this, we could talk about a (partial) textile recycling economy, but with 70-80% of products still made of virgin fibres, we would remain far from the ideal of a truly circular economy.

For further progress towards this ideal, we would also need to fully exploit the various life cycle extension strategies such as reuse, repair, repurposing and remanufacturing. Such strategies were common practice for all sorts of textile products in the past. The fact that they are much less common today has both industry-specific reasons such as lower average product quality, lower new product costs and faster fashion changes, but also socio-economic drivers. Re-use happened typically between siblings or even between generations in larger closely living families or between members of smaller communities. Repair (mending) or remanufacturing was a common informal non-compensated domestic task predominantly carried out by women. I still today use a tea towel which my grandmother repurposed (remanufactured) in the 1990s from a piece of bedlinen which had been made in the 1960s or 70s in the textile mill for which my grandfather worked as a master weaver. Families today are smaller, more atomic and the predominantly urban population is less communal. Less and less people today are available or skilled enough to carry out informal textile mending work.

In the absence of such cost-effective informal economy solutions, people will need to turn to the formal economy represented by second-hand shops or repair services whose labour costs make the economics more tenable. Repair vouchers financed through EPR fees are pilot tested in France currently to make clothing repair more affordable. Professionalisation, standardisation and automation of clothing repair in brand-supported workshops or microfactories (also usable for customisation or short-run new production) can drive down costs. Another idea discussed by Walter Stahel in an interview with Ellen MacArthur is the non-taxation of labour involved in such product life extension tasks. While usually not completely tax-exempt, textile sorting, reuse and repair operations are often part of the social economy providing tax-incentivised employment opportunities for people with some distance from the labour market. Indirectly, the payment of higher (living) wages in the main production countries of new textiles, could make reuse, repair or recycling incrementally more competitive.

It is in my opinion the labour cost component that is the most overlooked confounding variable of the realisation of a circular textile economy in the industrialised world. As long as we predominantly focus on material and (recycling) process innovation, all we will be able to get at best is a recycling economy.

All R-strategies put together could collectively over time make the case for a Textile Circular Economy stronger, but if they continue to be thrown into direct competition with an industry that in terms of quality and prices for newly manufactured products is on a merciless race to the bottom, they stand no chance.

If regulators are clear-headed, forceful and coordinated, they can bring about real change. If not, the Textile Circular Economy will remain a naive exercise of wishful thinking out of touch with economic reality and as far as textiles are concerned, we would need to correct the title of the 1st EU Circular Economy communication to “Towards a circular economy: A zero waste impact programme for Europe”.

Disclaimer: The views and opinions expressed are my own and do not represent those of the European Technology Platform for the Future of Textiles and Clothing or any other organisation I may be affiliated with.