Small But Perfect Toolkit 6: Circular Business Models

Circular Business Model

By Bocconi University

Acknowledgements

In this module Francesca Romana Rinaldi, Director of the Monitor for Circular Fashion SDA Bocconi School of Management, is talking about circular business models in fashion.

This toolkit was drafted thanks to the financial support of the European Innovation Council and Small and Medium Enterprises Executive Agency (EISMEA) COSME Programme, under the Call for proposals COSCIRCFASH-2019-3-02.

We would like to acknowledge the contribution we received from:

•The consortium of the project

•Fashion Revolution

•All other stakeholders we have engaged with in the drafting process

•In this module Francesca Romana Rinaldi, Director of the Monitor for Circular Fashion SDA Bocconi School of Management, is talking about circular business models in fashion.

Background information and inspiration

•Section 1: Background information and inspiration

•Section 2: Case studies

Case studies

•Section 3: Goals and potential shift

Goals and potential shifts

•Section 4: Reflection exercises

Reflection exercises

•Section 5: Worksheets, tools and templates

Worksheets, tools and templates

•Section 6: Resources &

Resources & references

Section 1: Background information and inspiration

Circular economy definition

Source: European Commission (2015): Closing the loop – An EU action plan for the Circular Economy

“Circularity of a production process refers to the ability of such process to retain the value of products, materials and resources in the economy for as long as possible and to minimise to the greatest possible extent the generation of waste along all the steps of the value chain”

The circular economy is based on three grounding principles:

Eliminate waste and pollution

Regenerate Nature

Circulate products and materials

Key enabling factors:

Eco-design

Multi stakeholder collaboration

Economic conditions for scaling-up

Linear business models

take make dispose

Circular Business models

take make remake

Sustainability vs circularity

Sustainability and circularity don’t always match because of the presence of some trade-offs:

Environmental & social trade-offs

Economic trade-offs

Operational trade-offs

Quality trade-offs

Section 2: Case studies

Below you can find a selection of inspiring start-ups implementing circular business models

Quid Italy

Dressyoucan

Italy

Vestiaire Collective

France

End-of-life / upcycling Life Extension / re-commerce

Sourcing the raw material from the Italian fashion and textile players, using production surpluses and deadstock fabrics

Providing jobs to vulnerable people, especially women

Combining social and environmental positive impact

Vinted

Lithuania

Product as a service / rental Sharing / P2P platform

Renting of fashion clothing and accessories for women and kids

Reducing environmental impact and fashion consumption

Leading a global online marketplace for desirable preloved fashion

Certified B Corporation

Extending the life of clothes

Peer-to-peer marketplace and community for second-hand fashion

Ecosystem where users directly get money back from other users for the items they give away

quidorg.it dressyoucan.com

vestiairecollective.com vinted.com

Section 3: Goals and potential shift

Why should we be investing in circularity? What are the reasons

Obstacles & advantages of implementing circularity in fashion

Top ranking circular fashion

Top ranking circular fashion

AVAILABILITY OF INFRASTRUCTURE

EXTERNAL CULTURAL OBSTACLES

LAW AND REGULATORY OBSTACLES

AVAILABILITY OF EXTERNAL COMPETENCIES

AVAILABILITY OF INTERNAL COMPETENCIES

INTERNAL PROCESS INERTIA

INTERNAL CULTURAL OBSTACLES

How to shift from linear to circular fashion business models?

Transparency and traceability are key enablers to accelerate sustainability and circularity (UNECE, 2022).

Knowing entirely your value chain is essential to make the shift from linear to circular fashion business models.

Here are 6 activities of the circular fashion value chain:

Traceability and transparency have a direct impact on all activities of the circular fashion value chain.

5 Circular Fashion Business Models

KEY ENABLERS: TRACEABILITY & TRANSPARENCY

SUSTAINABLE INPUTS END OF LIFE LIFE EXTENSION

SHARING

PRODUCT AS A SERVICE

•DESIGN FOR CIRCULARITY

•CIRCULAR INPUTS

•CO-CREATION

•ON-DEMAND PRODUCTION

•MODULARITY

•REPAIRING SERVICES

•RE-COMMERCE

•RECYCLING AND REGENERATION

•UPCYCLING

•DOWNCYCLING

•P2P PLATFORMS

•RENTAL, SUBSCRIPTION RENTAL AND LEASING

Recycling is among the most relevant of circular fashion activities…but it is not the only one!

WASTE MANAGEMENT AND GREEN LOGISTICS

Section 4: Reflection exercises

Which circular business model?

Exercise 2

Exercise 1

Is your current business model linear vs circular?

Please define it with a short sentence (max 20 words).

Which circular business model(s) are you adopting or planning to adopt for the future?

Please select among the 5 circular business models below and consider the related value-chain activities.

Write a short paragraph on the relevance of the selected circular business model(s) for your business.

Section 5:

Exercise 3

Which circular fashion activities should be implemented?

Considering the relevant circular business model(s) identified in the previous exercise, highlight the circular fashion activities to be implemented.

You can select from the list below.

Modularity solutions

Waste management

Worksheets, tools and templates

Needs

Exercise

Repairing services

Co-creation

Design for circularity

Which are the main needs for a SMEs (small medium enterprise) to implement circularity in fashion?

Take some time to write down a full list of the needs of your business.

Downcycling

Now condense them down to the top 3 and see how they relate to circularity and circular business model(s).

Re-commerce

Upcycling

Green logistics

Circular inputs

Recycling and regeneration

Sharing through peer-to-peer platforms

On-demand production

Rental, subscription

rental and leasing

Obstacles

Key stakeholders

Exercise Exercise

What are the main obstacles to overcome?

Take some time to write down a list of the main obstacles you can foresee in the implementation of circularity in fashion.

Which are the three main stakeholders to involve in your business? How are you planning to engage them?

Take some time to map the key stakeholders for your business.

You may choose from the stakeholders below:

Other companies present in the fashion industry

Other companies present in other industries

Suppliers

Final users

Investors

Government

Non-governmental Organizations (NGOs)

International Organizations (IOs)

Other stakeholders

Now condense them down to the main 3 and reflect on strategic approaches and tools to engage them.

Section 6: Reading list, further resources & references

Quotes

and inspirations

Buy less, choose well, make it last

Vivienne Westwood

If we could build an economy that would use things rather than use them up, we could build a future.

Ellen MacArthur

Everything we make pollutes. The most responsible thing we can do is to make each product as well as we know how so it lasts as long as possible.

Yvon Chouinard

Consider this: all the ants on the planet, taken together, have a biomass greater than that of humans. Ants have been incredibly industrious for millions of years. Yet their productiveness nourishes plants, animals, and soil. Human industry has been in full swing for a little over a century, yet it has brought about a decline in almost every ecosystem on the planet. Nature doesn’t have a design problem. People do.

Michael Braungart & William McDonough

Terminology

Business Model

A business model is the way a company is organized, its basic architecture, made up of: the value proposition, the profit formula, the key resources, and the key processes.

The value proposition

“an offer system that allows customers to solve a problem more effectively, reliably, practically and conveniently, at a specific price”1

The profit formula

“the economic model that defines how the company creates value. It specifies the assets and structure of fixed costs, as well as the margins and the speed necessary to cover them”1

The key resources

“the unique nature of the people, technology, products, structures, equipment, financing and trademark, necessary for the value proposition to the customer”1

The key processes

“the means through which a company maintains the value proposition for the customer in a sustainable, repeatable, modular and manageable way”1

Sustainability

The term Triple Bottom Line (TBL) –People, Planet and Profit – was introduced by John Elkington in 1997.

This model set up the key of longterm strategies for companies making the transition to sustainability, based on three important dimensions of sustainable development: environmental quality, social equity, and economic benefits.2

In the simplest terms, the TBL agenda focuses corporations not just on the economic value that they add, but also on the environmental and social value that they add –or destroy.3

Co-creation

Product or service design process in which one or more players of the supply chain, or the final users, are involved directly.4

www.sdabocconi.it/ circularfashion

Circularity

The circular economy is based on three principles, driven by design:

• Eliminate waste and pollution

• Circulate products and materials (at their highest value)

• Regenerate nature

It is underpinned by a transition to renewable energy and materials. A circular economy

decouples economic activity from the consumption of finite resources. It is a resilient system that is good for business, people and the environment.5

ellenmacarthurfoundation. org/topics/circular-economyintroduction/overview

Regeneration

The third principle of the circular economy is to regenerate nature. By moving from a take-makewaste linear economy to a circular economy, we support natural processes and leave more room for nature to thrive.

By shifting our economy from linear to circular, we shift the focus from extraction to regeneration. Instead of continuously degrading nature, we build natural capital. We employ farming practises that allow nature to rebuild soils and increase biodiversity, and return biological materials to the earth. Currently, most of these materials are lost after use and the land used to grow them is depleted of nutrients. If we move to a regenerative model, we begin to emulate natural systems. There is no waste in nature.5

ellenmacarthurfoundation.org/ regenerate-nature

5

1 Johnson, 2010

2 Elkington, 1997

3 Elkington, 2004

4

Further reading

Books

Rinaldi, F. R. & Testa, S. (2014)

“The Responsible Fashion Company” Greenleaf Publishing – Routledge

Rinaldi, F. R. (2019)

“Fashion Industry 2030”

Egea – Bocconi University Press

Rinaldi, F. R. & Testa, S. (2022)

“L’Impresa Moda Responsabile”

Egea

Reports

Ellen MacArthur Foundation (2017)

“A New Textiles Economy: Redesigning fashion’s future”

www.ellenmacarthurfoundation. org/publications/a-new-textileseconomy-redesigning-fashionsfuture

“Monitor for Circular Fashion Report 2021” &

“Monitor for Circular Fashion Report 2022”

sdabocconi.it/circularfashion

Circular Fashion Manifesto 2022

www.sdabocconi.it/upl/entities/ attachment/circular_fashion_ manifesto_2022.pdf

Policy papers

United Nations Economic Commission for Europe (2022)

“Enabling Sustainability and Circularity in Garment and Footwear: Policy Developments and Industry Perspectives on Traceability and Transparency” Geneva: UNECE

www.thesustainabilitypledge. org/toolbox.html