H&M & Ellen MacArthur Foundation Call for Circular Fashion

According to Earth.Org, of the 100 billion garments produced annually, 92 million tonnes end up in landfill.

Across the fashion and textiles industry, businesses and organisations are calling for policy action to reduce waste and incorporate a circular economy.

Led by the Ellen MacArthur Foundation and endorsed by 69 fashion industry leaders such as Carrefour, H&M Group and Stella McCartney, the call for policies to embed and help circular business models scale is stronger than ever.

Circular economy for fashion

According to the Foundation, keeping materials in use at their highest value requires a combination of circular product design, circular business models and end-of-life infrastructure.

Resale and repair are imperative business models that can present unrivalled opportunities for businesses to stay competitive and resilient.

When products are diverted from landfills and waste streams, it helps decouple revenue from production and embed the business more deeply in the circular economy.

Despite this sustainable initiative, current investment and policies favour product design and end-of-life infrastructure.

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Due to this favourability, businesses investing in circular business models are facing market barriers when attempting to scale, says the Ellen MacArthur Foundation.

The Foundation, along with the 69 fashion industry organisations, are calling for:

• Reduced VAT (across the EU) and eliminated sales tax (in Canada and the US) on resold products and repair services.
• Reduced labour taxes (across the EU) and an incentive package that includes labour tax credits (in Canada and the US) for jobs involved in resale and repair operations.
• Extended Producer Responsibility (EPR) policy to aid in creating separate collection and sorting infrastructure at scale.

“Resale is often positioned as ready to scale,” writes Leyla Ertur, Chief Sustainability Officer at H&M Group, on LinkedIn.

“In reality, the economics are not there yet.

“Looking at models like Sellpy and branded pre‑loved, the system still favours linear production — driven by tax, labour costs and the way collection and sorting are funded.

“The Ellen MacArthur Foundation analysis points clearly to where that imbalance lies.

“Resale won’t scale on ambition alone. It requires a system that makes it viable.”

Resource-intensive businesses

According to the Foundation, current infrastructure and government policies often make it more profitable to produce new items from virgin materials.

“Manufacturing processes have been made to optimise for identical, high-volume production,” says Ellen MacArthur.

The foundation highlights that circular business models involve labour-intensive processes such as sorting, cleaning and repairing, which tend to yield lower margins and incur high taxes and costs that do not decrease at scale.

“It is this economic trap that disincentivises keeping products in use,” states the Foundation.

Despite these negatives, businesses are already choosing to invest in circular business models for economic reasons.

"We’ve seen real progress on circular business models but they remain a small part of a very large industry,” says Christiane Dolva, Head of Innovation, Research & Demonstration at H&M Foundation.

“Without policy that actively removes economic barriers, there’s a risk that circular models will stay stuck as a niche instead of becoming the norm. 

“This is what The Fashion ReModel policy statement sets out to change.”

Policies for good

It is highlighted that governments that implement this policy mix can turn circular business models into a source of economic growth.

While the economy can grow, fewer resources will be used, fewer emissions can be produced and more jobs can be created.

“If governments are serious about circularity, they need to act by removing double taxation, reducing labour costs and removing other barriers that hold resale back," says Leyla.

"Fixing the economics of resale is one of the fastest and most concrete ways to scale circularity in fashion."

The Foundation states that brands can retain cost savings and could see gross margins reach up to 55% for resale and 41% for repair.

If the majority of savings had been passed on via lower prices, modelling suggests that resale market share could have reached 12% in the EU and 14% in the US and Canada in 2023 if these circular policies had been in place.