Planning profitable circularity strategies

In today's textile industry landscape, sustainability become an important necessity to face. As consumers become conscious of their environmental impact, fashion brands are under pressure to adopt circularity into their operations. However, balancing sustainability with profitability can be a challenging but attractive task. In this article, we'll explore the challenges companies face in this regard and provide strategies for integrating sustainability into profitable business models.

Financial challenges for the circular economy

One of the main challenges companies face when they try to balance sustainability with immediate profitability is the perceived trade-off between the two. Many brands assimilate sustainability initiatives as expensive investments that won't be financially returnable, perceiving them as short-term strategies and quantifying the circularity of long-term benefits can be also challenging. This situation may hold back circularity investments investors who prioritize short-term returns.

Long-term circularity benefits

Companies must adjust their financial models and strategies to adapt them to the long-term benefits of circularity, adopting a new approach to consider other business landscapes that consider a company's impact on the environment and society.

Incorporating sustainability metrics into financial reporting and decision-making processes is just the first step to identifying how a sustainable strategy is performing. This will make companies understand the real costs and benefits of their actions. 

Another view to benefit from circularity is to explore new business models aligned sustainability with and profitability. For example, companies that have explored circular economy principles can discover new business niches or market necessities to fill them with new circular solutions, offering a competitive advantage to current industries, such as Recovo providing reusing, recycling, and waste management circular solutions to the fashion industry.

Tips for implementing profitable circular strategies

Prioritising circularity over short-term profits can be challenging for some companies. To go over with it, there are some tips to mitigate its risks:

1. Engage stakeholders: Including employees, customers, suppliers, and investors, to communicate the long-term benefits of circularity initiatives, everybody must be aware of them
2. Incremental Implementation: Companies should gradually integrate sustainable practices into their operations instead of adopting a huge number of them in a short time, making the process of identifying good and bad practices easier.
3. Collaboration and Partnerships: Collaborating with other organizations can reduce risks and circularity initiative costs. Other expertise and experience can be some of the best ways to introduce sustainability into your brand.
4. Diversification: Traditional products or services cannot be erased from one day to another. Cost-effective transitions to zero waste or carbon-neutral must be planned before to be effective and profitable.

Measure and track the circularity transition

To effectively communicate the financial benefits of sustainability initiatives to shareholders, companies must develop and implement effective methodologies to measure and track the return on investment (ROI) of the strategies.

Life cycle assessment (LCA) tools which evaluate the environmental impacts of a brand's products and processes throughout their life cycle can be useful to define and understand circular strategies, such as the revenue from reduced resources cost savings.

The companies can also track brand reputation changes. Sustainable brands usually increase customer loyalty, employee retention, and other factors related to profitability.

Aligning circular goals with the overall business strategies

Creating synergies between the different company's assets is very important to increase its benefits. Circularity must be also part of this mix, becoming one more of the overall business strategy. Correct circularity goals must be aligned with the other department goals and incorporate its metrics into decision-making processes at all levels of the company; circularity strategies mustn't be in the background.

One approach to integrating sustainability into profitable business models is the adoption of circular economy principles. Circular business models aim to minimize waste and maximize resource efficiency by designing products and processes for reuse, repair, and recycling.

In the fashion industry, for example, Recovo has adopted circular principles by promoting a new circular-based fashion industry, where brands can acquire their fabrics from a deadstock marketplace, or manage their own leftover materials through CiMS™ circularity software to reduce its waste production and their supply costs.

Shifting mindset from linear to circular principles

Adopting the circular principle requires a new mindset from traditional linear models of "take, make, waste". Circular economy considers the entire product lifecycle. 

Rethinking product design methods, manufacturing processes, how the distribution channels are set, or end-of-life product management, both in your company and its partners, are some of the most important points to focus on in a circular economy transition. 

Connecting circularity to overall sustainability strategy

To maximise the value of circular business models, companies must connect their circularity initiatives to their overall sustainability strategy. This involves considering the full impact of their operations on the environment, society, and the economy, and aligning their circularity efforts with broader sustainability goals and targets.

By taking a holistic approach to sustainability and circularity, companies can identify synergies and trade-offs between different initiatives, prioritise efforts that deliver the greatest overall value, and ensure that their sustainability efforts are integrated and mutually reinforcing.