Aditya Mahapatra

IE Section Head, Alpha Omega Egypt

Circular Business Model & Its Scalability in Fashion Business 

The concept of circular economy and circular business models (CBMs) have garnered substantial attention in recent years. A CBM aims to create, deliver, and capture value while implementing circular strategies to prolong the useful lifetime of products & parts and ceases material loops (Nußholz, 2018); with an objective to replace virgin material with secondary material- through strategies of slowing, closing, or narrowing the resource loops involved (Bocken, et al., 2016) 

Being one of the most polluting and resource-draining industries, (Ellen MacArthur Foundation, 2017) (Pal & Gander, 2018) fashion industry in recent years has started adopting CBMs activities in larger scale-although many are successful, are actually often small-scale or niche initiatives bereft of any large impact on the economy as a whole (Hultberg, et al., 2019). This is partly attributed to the barriers and challenges such as- lack of consumer acceptance, absence of regulatory or technical support (Franco, 2017); the “fast-fashion”-focus and functional limitations further add to the complexity while creating and capturing value from CBMs (Stål & Corvellec, 2018) (Pal & Gander, 2018). Nevertheless, knowledge of how to overcome these barriers and underpinning logics of scaling in fashion industry context is direly lacking in otherwise growing body of CBM literatures. The discourses revolve more around adoption, implementation and environmental performance ((e.g.- – (Bocken, et al., 2018) (Franco, 2017) (Linder & Williander, 2017)). Therefore, researches are required to establish novel strategies in fashion business context beyond the traditional scalability ideology of efficiency & economy of scale in production processes (Täuscher & Abdelkafi, 2018)- by broadening logics for creating value (Linder & Williander, 2017) beyond  economic gains with tactics to involve and improve scalability that impacts social  norms, culture and policy (Moore, et al., 2015)- addressing all 3 bottom line perspective of performance, as, social aspects also play key roles here alongside environmental & economic performance (Ferasso, et al., 2020) (Lewandowski, 2016). 

Circular Fashion Business & Paradoxical Tensions 

However, strategizing scalability alone will not provide solution for large-scale CBM adoption as the two elements- circularity and commercial value creation at times manifests contradictory relationship (Morales, 2020). Daddi et al. (2019) shed light on this tension by analysing firms that utilize waste as a resource in the textile sector in Italy. They found the strategy of relying on secondary raw materials brings a limitation for the commercial value creation of the company, since it restricts access to specific markets (Daddi, et al., 2019)- thus, culminating not always being in synergy (win-win).  

Whilst most of existing literatures are focused on accelerating circular economy adoption, they provide neither an overview of paradoxical tensions, nor the management strategies to deal with. These studies also often overlooks a wide variety of other CBMs such as those focusing on extending the value of existing products (Morales, 2020). They neither criticize nor offer insights into what policies may mistakenly be considered circular that might pose undesired consequences in long-term. Zink and Geyer assert that, sustaining the loops of production and consumption by keeping materials in the economy may create issues by capping material circulation, and igniting rebound effect threat (Zink & Geyer, 2017).  The extra cost of improving and refining a circular material flow will inevitably reach a point where the cost exceeds the corresponding benefits to society (Andersen, 2007)- creating a trade-off with energy demand, bankrupting circular start-ups and SMEs, and posing a risk to human health (Greer, et al., 2021). 

Therefore, it opens up a door to studies to conceptualize the idea and incorporate knowledge from related research streams to CBMs that might be useful in providing insights and setting up strategy in regard to paradoxical tensions. 

Circularity: Performance Metrics 

While the concept and its application are being extensively explored, the definition of tools and criteria measuring “circularity” of products, companies or regions are yet not well-defined owing to the still open debate on conceptualization of CE which based on a common conceptual framework.  As a result, the absence of standard indicators to track progress on circularity is leading to contradiction and misunderstanding- which represents a challenge to stakeholders in the implementation of different CE strategies (Rincon-Moreno, et al., 2021). Shortcomings of the extant literature can be identified in terms of integration of the circular economy’s level, theoretical development and empirical application, characteristics of the indicators proposed, sustainability consideration, holistic industrial systems-perspectives, and scalability to adapt to firms’ different characteristics. Hultberg & Pal also stressed on new metrics for measuring and comparing performance between CBM initiatives and linear models regarding micro-foundation of exploiting the financial resources to find new ways of measuring the cost of the conventional business & finding the financial arguments for CBMs (Hultberg & Pal, 2021). Helfat et al.’s proposed ‘technical and evolutionary fit’ model here can be used as two general yardsticks to inform a further scrutinizing of measuring and judging DCs involved in the scaling of CBMs (Sandberg & Hultberg, 2021).  

Therefore, new insights into the contexts of economic circularity indicators needs to be explored what CE performance is, what dimensions of it in fashion business context have to be evaluated and its interrelatedness with sustainability metrics to expedite the adjustment of circular business practices from a sustainability function into a growth or expansion function within the company.  

References 

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