Business development

Circular Business Models for Textile & Clothing

This resource provides an overview of circular business models for T&C and the different dimensions through which a company can effectively design one. A specific business model canvas is explained and provided as a worksheet.

Introduction

In the current business environment, economic, socio-political, and technological forces are generating radical and often unpredictable changes. As a result, a key challenge for managing these changes is to develop innovative and sustainable Business Models (BM) that could be adopted by organisations of any size to achieve sustainable competitive advantages.

Business modelling refers to the design and governance of an organization’s value creation, delivery, and capture activities within a specific external environment. Therefore, it refers to an organization’s plan for offering products or services to a specific target market in a profitable manner.

Recently, the focus of BM has shifted towards effectively meeting sustainability goals by achieving what is called triple-bottom-line results (economic, social, and environmental outcomes). A sustainable or circular business model should consider all stakeholder groups and must provide economic as well as environmental, and social value (Curtis & Mont, 2020). Circular BMs can have a wide range of important benefits both for large existing (or incumbent) organizations, SMEs, as well as for start-ups, while also contributing to the betterment of society and the environment.

In the sections that follow, circular business models are analysed for the textile and clothing (T&C) sector. Initially, a description of the dimensions of circular business models in the T&C sector is provided, along with a description and examples of how this dimension can be effectively implemented in the T&C sector. Then, the most widely used tool for designing a business model (i.e., The Business Model Canvas) is presented so that companies in the T&C sector can effectively redesign their business models to make them more effective and sustainable.

The dimensions of Circular Business Models for T&C

In the Textile and Clothing (T&C) industry, growing concerns regarding resource depletion, textile waste, gas emissions, water consumption and labour conditions have increased the need for implementing circular BMs to create and capture value in the market. A circular business model in the T&C industry aims at extending the life cycle of products and materials through activities/dimensions such as durable product design, resource-efficient production, reuse, resale, rental and sharing, repair and maintenance services, recycling and waste circularity. The following figure illustrates the main dimensions espoused by different organizations in the T&C sector that are implementing circular business models to create, deliver, and capture value in innovative and sustainable ways.

The table below presents a description of the aforementioned dimensions, analyses how company’s BMs can be designed to effectively meet each circularity dimension and provides some indicative sources and examples that are particularly relevant to the T&C sector.

The Business Model Canvas for sustainable T&C SMEs

The Business Model Canvas (BMC) is a practical strategy tool that can help SMEs design their business model. The canvas consists of nine interconnected building blocks that, when completed, portray the key elements of the business.

To fill in the BMC, an SME should start by defining its Value Proposition, that is the products or services offered and the benefits they provide to customers. In order to achieve circularity of its BM, a company in the T&C sector should first identify in which dimensions of the ones outlined in the table presented above it wants to center its BM on and how this can provide benefits to both the organization and its customers. For example, for an SME that participates in the FABRIX project turning discarded plastic into fashion accessories, while combining Indian craftsmanship, circularity and vegan materials, the value proposition could be: “Functional, handcrafted bags and lifestyle accessories made from reclaimed materials, combining traditional Indian weaving techniques with circular design, vegan materials, and a zero-waste mindset.” Another example, for a Greek SME that participates in the FABRIX project and produces exclusively in Greece, handmade women’s accessories that combine tradition with modern design and luxury, the value proposition could be: “Unique handmade accessories that combine Greek craftsmanship, heritage-inspired design and modern elegance”.

Next, particular Customer Segments that the company will target should be specified (i.e., the target market) together with the main Channels through which a company communicates with and reaches the market. For example, for a Greek SME that participates in the FABRIX project and repurposes used event banners into bags/accessories, the customer segments could be: Eco-conscious consumers, Tourists and visitors to Athens, Museum and cultural-event audiences, Repair/circularity-minded existing customers. For the same company the used channels could be: the e-commerce website, the physical store, museum shops and B2B partnerships.

Customer Relationships explain how an SME attracts, serves, and retains its customer base, while the Revenue Streams block identifies how the company generates income from its market offerings. Examples of these building blocks for the aforementioned SMEs in the FABRX project, for customer relationships could be: Personalized relationships and direct communication, while for revenue streams could be: Direct sales of handmade products, limited edition collections and custom/made products.

Further, Key Resources refer to the tangible and intangible resources required to deliver the value proposition, such as employees, technology, equipment, or brand name and intellectual property rights. Key Activities describe the most important actions an SME should perform to operate successfully. Key Partnerships relate to suppliers, collaborators, and other external organizations that support the SME. Lastly, the Cost Structure outlines the major costs associated with operating the business model. For a company in the circular textile manufacturing industry these costs could relate to: material procurement, production, repair, labor, logistics, warehousing, marketing etc.

By completing these nine building blocks and examining the relationships among them, SMEs can identify opportunities for innovation, evaluate the feasibility of new ideas, align their resources and activities with customer needs, and develop a coherent and sustainable business model that supports long-term growth and competitiveness.

Contributed by Athens University of Economics and Business.