Closing the Loop: Transforming the Textile Industry

The textile industry has long relied on the linear "Take-Make-Waste" model, involving raw material extraction, product manufacturing, and disposal after use. This sector is responsible for approximately 10% of global CO₂ emissions¹ —surpassing the combined emissions of international air and maritime transport². Additionally, it is the second-largest consumer of water globally and is responsible for 20% of global industrial water pollution³. Annually, 92 million tonnes of textile waste are generated⁴, with less than 1% being recycled into new garments.⁵

Clothing collection is not a long-term solution

We do not need to look beyond our borders for such examples of waste: Swiss consumers discard over 100,000 tonnes of clothes each year⁶. However, many Swiss households are aware of the environmental impact of textile waste which is why 50,000 tonnes of clothing are collected each year instead of discarded.⁷  Most of this clothing is transported to Italy, Belgium and Eastern Europe for sorting and further processing. Ukraine is a primary export destination due to its existing sorting and recycling facilities and a local demand for second-hand clothing—a trend that existed even before the war.

However, the second-hand market is increasingly overwhelmed by the growing volume of fast fashion and its low quality. Such clothing is often challenging to recycle because its often made from textile blends and has a low resale value, reducing the economic viability of collecting it. Companies like Tell-Tex and Texaid report declining revenues and rising costs for sorting and disposal. Additionally, there are also concerns that exporting used clothing could disrupt local markets in recipient countries, hindering domestic textile production.

From clothing collection to monetising the circular economy

The necessity of transitioning to a circular economy model, where materials remain in use for longer and their value is maximised, is becoming increasingly evident. The EU textile strategy⁸, developed under the European Green Deal, demonstrates how governments can encourage companies to take responsibility. This strategy mandates that, from 2026 onwards, companies must fulfil take-back and recycling obligations for their products. Implementing circular business models is one such way to address this strategy.

Circular business models focus on designing out waste and pollution, keeping products and materials in use, all while unlocking new revenue streams. By 2030, business models that secured market leadership in the past may no longer succeed in the EU, due to new regulatory requirements and observable changes in consumer sentiment pushing companies towards sustainability⁹. This new landscape presents opportunities for companies that act decisively and embed circularity end-to-end. In the textile industry, upstream activities can involve designing for durability, repairability, and recyclability. Ecodesign, the integration of environmental sustainability considerations into the characteristics of a product¹⁰, addresses issues faced in recycling low-quality and poorly produced clothing. Downstream, consumer-facing practices such as Product-as-a-Service (renting or leasing products to customers) and take-back schemes provide additional sources of revenue and increase touchpoints with consumers. A few innovative companies have paved the way, proving the potential for circular business models to be desirable to consumers, feasible for companies to transition to, and viable for economic growth.

Efforts are also intensifying in Switzerland. The principle of closed-loop systems was incorporated into the Environmental Protection Act in 2023 through a parliamentary initiative for a Swiss circular economy. However, unlike the EU, this legislation and the resulting regulation focus more on voluntary industry initiatives. Notably, several leading Swiss fashion companies along with the industry association Swiss Textiles, have founded the Swiss Fabric Loop association. This association advocates for a sector agreement and an advance recycling fee. This fee would ensure that consumers contribute a small amount towards future disposal when purchasing clothing, similar to the fees for electronics, aluminium, or PET bottles. The Swiss Fabric Loop association was officially founded in November 2024, to promote the implementation of these measures. Another significant step is the construction of a modern recycling centre in St. Margrethen by Tell-Tex, with an investment of CHF 40 million, set to be operational by 2026.

We are also working to advance circularity in fashion through the CTI Fashion Initiative, a collaborative effort led by WBCSD, VF Corporation and Deloitte. It provides companies in the fashion industry with tailored circular metrics to measure progress and promote accountability and transparency in sustainability efforts.

Recycling is also important for exported products

For many Swiss companies, EU regulations are just as important as domestic ones, especially for products exported to the EU. One of the most significant regulations is the introduction of extended producer responsibility (EPR), which requires companies to take responsibility for the entire lifecycle of their products, including take-back and recycling systems. Companies must ensure that their products are properly collected and recycled after use, necessitating financial and organisational investments in such systems. Additionally, the Ecodesign for Sustainable Products Regulation (ESPR) mandates that companies provide a digital product passport (DPP), containing comprehensive information on materials, environmental impact, and the entire value chain. The Waste Framework Directive also aims to vary waste fees based on recyclability, with easily recyclable textiles incurring lower fees.

For Swiss companies looking to remain competitive and maintain their export opportunities to the EU, this means adapting their production and supply chains to meet the new EU requirements. Establishing partnerships with recycling companies, developing more sustainable products, and ensuring supply chain transparency are key measures for achieving compliance.

Five points for a successful strategy

In summary, companies should consider the following points:

1. Understand the regulatory environment: The regulatory landscape is evolving rapidly, and it is crucial to understand the upcoming requirements, incentives, and support opportunities in target markets regarding the circular economy.
2. Conduct material analysis: Analyse the composition of your products to identify challenges and opportunities within the circular economy. Understanding material flows will help in designing products that are easier to recycle and have a lower environmental impact.
3. Monetise circular practices: Identify and evaluate various options for integrating circular practices into your business. This could involve adjusting material choices, considering alternative suppliers, or closing loops. Assess these options for economic viability, considering both costs and potential business opportunities.
4. Perform impact analysis: Circularity will have significant social and environmental impacts. New jobs will be created within a circular value chain, and important decarbonisation and nature-positive impacts can be achieved. Continuously conduct and monitor impact analyses to capture these benefits.
5. Develop a roadmap: Prioritise your options and plan their implementation step by step. Regularly update steps 1–3 to adjust your company’s path towards circularity. A well-defined roadmap will help in systematically achieving your circular economy goals.
   
   

How Deloitte can help

Deloitte can help your organisation make the shift to more sustainable and circular business models. We start by assessing your company's current circularity maturity, looking at material inflows and outflows, and how you manage impacts, risks, and opportunities.

We help you understand your position relative to existing circular economy regulations and create a tailored action plan to ensure compliance. Our team evaluates your main material flows and environmental footprint, benchmarks against potential scenarios, and identifies target scenarios for better circularity and business value. We also model different scenarios to pinpoint strategic choices and initiatives that can drive your circularity and business goals.

We also prioritise initiatives, mobilise resources, and establish KPIs and governance to monitor circularity metrics and guide resource allocation. Deloitte is here to support your organisation in navigating the complexities of circularity, ensuring compliance, and achieving sustainable growth.

Thank you to Merel ten Hoedt for her contribution to this article.