Due Diligence Partnerships Can Work Wonders for Circularity

The CFP was meant to achieve a long-term scalable transition to a circular fashion system, says Holly Syrett, Impact Programmes and Sustainability Director at GFA. This was meant to be done in two ways: first, a cross-sectoral project to support the development of the recycling industry in Bangladesh by capturing and directing post-production fashion waste back into the production of new fashion products; and second, creating a blueprint for upstream circularity that could be replicated across the manufacturing countries.

"We believe that circular fashion systems must be approached from a global supply chain approach and that manufacturers are key in being part of what that new circular system could look like so that we can redistribute value in a fair way and develop a new system that is not extractive, maintains the value of materials that are in it, and distributes value."

The CFP started with an ecosystem approach. "We started by developing circular commercial collaborations with partnerships between brands, manufacturers and recyclers to first segregate post-industrial textile waste within manufacturing facilities; then digitise the waste streams and track them to suitable recycling solutions; and then explore as a second stage how could those recycled materials be reincorporated into new products.

"We also started looking at the broader ecosystem and how we can create a conducive environment to enable these circular systems. We started exploring what the political barriers could be, and how we could make a business case for investment to increase domestic recycling capacity. This part focused on the business model--what can collaborations look like throughout the value cycle and how can we reframe business models to be more circular. What goes around comes around; so, how can we ensure this throughout those different chains of waste. And then, how can we aid those infrastructures by a supported policy and investment."

Syrett talks about the outcomes. "We saw the benefit of collaborating with a large group of stakeholders throughout the industry to create a unified voice and awareness, and also to see how it can address issues that can’t be addressed independently--such as the ownership of waste and how we can, for instance, create more awareness through a shared effort."

The CFP platform made it possible to trace the textile waste. Ann Runnel, CEO & Founder of Reverse Resources, hoped to quantify how much waste was captured from the factories, how much of that was distributed to different recycling partners. The numbers got big by the end of the year, and one and a half thousand tonnes of waste was registered on the platform. Majority of the waste registered on the platform that was traced was 100% cotton or very cotton rich, because this was what the recyclers were really looking for.

"There was a good traction on the platform. We got a lot of positive engagement from many stakeholders which seemed quite an impossible task a year before. As part of the project, we also quantified what would be the opportunity for Bangladesh; how much waste there is from general production; and, whether the material flows through the country.

"We concluded that 250,000 tonnes of waste from the readymade garment factories were cotton rich and could be recirculated back into the industry, and Bangladesh could save 15%--half a billion dollars from just using its own cotton waste as a raw material for the industry again.

"It was the first time we could quantify this at a country level and show that the opportunity is really huge for the circular economy. We also were able to show through this project that there is a very strong business case. It’s just not nice to dream, but it is a practical business case to work towards circularity."

Besides all the positives, the project also identified a few barriers that really need to be addressed to further scale the work not only in Bangladesh but at the global level as well. This becomes important to make note of given the case at hand: a USD4.5 billion opportunity across six major textile manufacturing markets--Bangladesh, Vietnam, Turkey, India, Malaysia and Indonesia.

There were barriers in Bangladesh. Says Syrett, "In the first year, the main barrier was the need to formalise the informal waste handling sector which is currently informal and engage in the circular systems we were developing and testing. There was a need to create a closed loop and to digitise and capture the value. There needs to be a more formal approach. We also need to establish a common understanding of waste ownership.

"There was a need to adopt traceability to present waste value and flows. We didn’t know what the opportunities were without the work conducted by the manufacturers in the project and the Reverse Resources team."

There were issues that needed to be addressed: identifying and removing the opacity around the topic; addressing limits on waste generation and taxation in the country; balancing the conversation on post-used garments and post-industrial waste capturing; harnessing the potential of export processing zones.

"We believe that one of the main success criteria for the initial phase of this project was bringing together different players (recyclers and brands) to talk about material characteristics and exploring how recycled materials can be included in collections even if they might not meet a criteria that a brand currently has."

Copenhagen-based GFA has been guiding leaders around the world to take action on increased sustainable performance. Its vision is a net-positive fashion industry. One of the key strategic components in achieving this vision is the alignment with the UN SDGs.

Explains Jonas Eder Hansen, Chief Development & Policy Officer at GFA: "Because of the behaviour of fashion and textile companies, it is key to succeed and deliver on the UN SDGs, including its human rights and environment related objectives. Many companies today need to implement comprehensive mitigation processes for adverse human rights and environmental impacts in the value chain by integrating sustainability into corporate governance and management systems.

"Given the significant number of value chain partners and overall complexity in our industry, companies may encounter numerous difficulties in identifying and mitigating risks in their value chains linked to human rights and/or environmental impact. We believe that the connection of this industry to millions of workers around the world through the global value chains comes with a big responsibility in addressing what these adverse impacts have on the rights of these workers."

Laws have already come into place. On 23 February, even as the 2022 OECD Forum was under way, the European Commission adopted a proposal for a directive on corporate sustainability due diligence. The proposal aims to foster sustainable and responsible corporate behaviour throughout global value chains. "For businesses these new rules will bring legal certainty and a level playing field," the announcement said.

It also pointed out that "a number of Members States have already introduced national rules on due diligence and some companies have taken measures at their own initiative." Hansen points this out as well. In 2017, France published the Vigilante Act and in 2021 Germany introduced the Supply Chain Duty of Care Act. Other EU member states like Belgium, the Netherlands, Luxembourg, Sweden and others are said to be planning similar acts in the near future.

"Regulation is really upon us as an industry," contends Hansen, "and many will argue that for too long the industry has been relying too heavily maybe on self-regulation and voluntary agreements. That has brought us far, but maybe not far enough. Many companies have taken serious actions, but too many companies have been free riding under the radar. This is also why the GFA has put a strategic focus on policy engagement. As an industry, we need to collaborate much more with policymakers to achieve binding agreements that would dramatically increase the sustainability performance of our industry.

"When the GFA and BCG  launched the first policy report in 2017 (Pulse of the Industry report), one of the report findings was that 50% of the industry had not even started on their sustainability journey. Five years later this has changed somewhat. But we would most likely see alarming figures today. In essence, the GFA welcomes efforts from policymakers to enhance these due diligence efforts in the industry."