This page is part of a guide on scaling circular business models in fashion. The insights here have been developed from analysis of the fashion sector, but will be relevant to other sectors.
To articulate how circular business models could deliver on climate mitigation, businesses are quantifying the emissions impact to support the business case. Businesses often use a combination of climate metrics for different stakeholders. There are five critical metric categories used in business decision-making today, listed below from most often to least often used. Three of the five categories provide insight into the emissions impact, and two of the five provide insight into the financial impact.
1/5 Absolute Emissions
Absolute emissions are the only metric able to evidence whether businesses are on track to meet decarbonisation ambitions, such as when disclosing to the CDP and reporting against targets set with the Science-Based Targets initiative (SBTi). Absolute emissions allow businesses to look at total GHG emissions across their inventory, such as to assess high-emitting areas of the business, and begin to identify efficiencies and innovations that can be achieved across supply chains.
Illustrative metrics used by the industry:
Total absolute emissions reduced from introducing a circular business model (e.g. resale)
Total emissions reduced for a supply chain tier as a result of introducing a circular business model
Most useful for communicating with the following stakeholders:
C-suite and senior leaders
Practitioners in reporting and compliance
Communications and external affairs
External investors
Supply chain management
Limitations of absolute emissions:
The current emissions accounting guidance unintentionally disincentivises circular business models. For example, it fails to make visible any quantitative difference in emissions generated between incineration with energy recovery and circular business activities, such as repairing, reusing, and recycling, which retain the embodied value and carbon of existing products. This would be resolved by revising the methodology to require the reporting of emissions from waste-to-energy incineration.
Key actions to improve the accuracy of absolute emissions:
Responding to the public consultation for the corporate standards and guidance by the GHG Protocol to ensure that accounting provides a true and fair account of the impact of circular activities, in line with insights and recommendations on improving emissions accounting.
Investing and taking part in further research to inform methodological gaps, such as via life cycle assessments, on how circular business models can support the fashion industry in meeting the 1.5-degree pathway.
Tapestry and Bank & Vogue: The partnership between Tapestry and Bank & Vogue on the Soho bag demonstrated how remaking products out of post-consumer existing denim has a lower environmental impact. Tapestry commissioned a life-cycle assessment to quantify that Bank & Vogue’s repurposed denim has up to an 80% reduction in GHG emissions and up to 95% less water consumption compared to conventional first-use denim. Listen to The Circular Economy Show podcast episode.
“Now that remanufacturing has been proven at scale…it's not just that we made a product that has lower emissions in carbon and water use, but being part of a product that was insanely commercially successful. That’s the real victory here.”
Steven, Co-founder, Bank and Vogue.
"Partnering with a supply chain partner at scale is so different from sourcing recycled materials or other environmentally preferred materials...working with Bank & Vogue, the Tapestry ESG team and compliance teams, we had to work together to create a new checklist for using post-consumer materials and making sure that we have all teams involved. To greenlight this project, we had to build in a lot of time to go through different things like labelling, testing, material composition, marketing claims, and make sure we were all comfortable and on the same page."
Megan Dawson-Elli, Product Sustainability Manager, Tapestry.
2/5 Emissions Intensity
Emissions intensity metrics provide an opportunity to compare circular business models to the traditional linear model across material usage and profitability, for example. Guidance on emissions intensity metrics is provided by the GHG Protocol.
Illustrative metrics used by the industry:
Emissions per gross merchandising value
Emissions per USD revenue
Most useful for communicating with the following stakeholders:
C-suite and senior leaders
External investors
Supply chain management
Limitations of emissions intensity metrics:
Emissions intensity metrics are unable to evidence absolute emissions impact and demonstrate progress towards the 1.5-degree pathway. The example above of emissions per USD revenue can be misleading. If the price of an item increases, it might seem like the item is less emissions-intensive, even if nothing else changes.
Key actions to use and showcase emissions intensity metrics:
Present different emissions intensity metrics to decision makers based on their priorities. For example, C-suite and senior leaders are most interested in GHG emissions per USD or gross merchandising value (GMV).
Demonstrate to investors that a circular business model could emit fewer carbon emissions than a linear model, particularly for those interested in climate-based solutions.
Arc’teryx: In 2020, Arc’teryx became one of the first Canadian outdoor brands to set science-based targets. Four years later, the brand had made significant progress in reducing emissions intensity. Transitioning away from intensity-based targets, in 2024 the brand announced bold new absolute science-based targets, on the road to net zero by 2050 or sooner. Intensity metrics remain a key opportunity for internal decision makers to recognise the financial opportunity of circular business models, and circular business models form a core component of the brand’s long-term climate strategy to achieve net zero.
3/5 Financial effects of climate change
Businesses that integrate climate risk into strategy are not being idealistic — they are being realistic. For circular business models, identifying the financial effects of climate change could capture the risk reduction potential for the business.
Guidance on the financial effects of climate change is provided by the Task Force on Climate-related Financial Disclosures (TCFD), European Sustainability Reporting Standards (ESRS), and IFRS S2 Climate-related Disclosures.
Illustrative metrics used by the industry:
Cost of alternative material sourcing (e.g. cost cost saved per year by avoiding conventional materials that would be impacted by climate change)
Projected repair costs for climate-proofing infrastructure (e.g., flood-resistant factories, cooling solutions for extreme heat)
Most useful for communicating with the following stakeholders:
C-suite and senior leaders
Practitioners in reporting and compliance
External investors
Shareholders and board
Limitations when articulating circular business models' impact on the financial effects of climate change:
Gathering the necessary quantitative data can be challenging. Businesses often describe the impact using qualitative terms, which can be more challenging to compare and articulate to decision-makers.At the same time, existing financial effects of climate change frameworks are focused on the consequences and risks, making it difficult to articulate the potential value that circular business models could bring. Such as what would happen if a business continues with business-as-usual, and the risks of this, rather than the immediate opportunities to mitigate those risks by scaling circular business models?
Key actions to use metrics related to the financial effects of climate change:
Revisit and revise climate mitigation and adaptation plans to include the full range of solutions, including circular business models.
Measure the costs that climate change will have on the business, calculating the emissions savings from the circular economy as a means of reducing costs and risks. Activities that have lower emissions can better mitigate against the costs a business will incur as a result of climate change and provide a resilient approach when compared to the linear business model.
Fast Retailing: Circular business models have been identified as a climate mitigation lever by Fast Retailing, owner of several brands including UNIQLO. Since October 2023, UNIQLO has offered restored and pre-loved items to customers across Japan via RE.UNIQLO. Outlined as part of Fast Retailing’s TCFD report, resale offers an opportunity to create new demand and improve reputation among customers, in response to an identified transition risk associated with climate change.
4/5 Internal Carbon Pricing
An internal carbon price could present circular business models as a financially appealing offering while demonstrating a lower carbon impact compared to the traditional, linear model. Very few organisations have begun using internal carbon pricing as a mechanism for circular business models. Guidance on internal carbon pricing has been provided by the CDP Putting a price on carbon, and the UN Global Compact calls on companies to set an internal price at a minimum of USD 100 per metric ton over time.
Illustrative metrics used by the industry:
A targeted carbon price on product and material waste
A targeted carbon price on suppliers using virgin materials
Most useful for communicating with the following stakeholders:
C-suite and senior leaders
External investors
Supply chain management
Limitations of internal carbon pricing:
The lack of standardisation and an inability to gather accurate emissions data both present a challenge. Without an accepted approach to calculate internal carbon prices, or legislation to enforce their use, organisations struggle to effectively implement internal carbon pricing. Specific challenges in how decision-making takes place at an organisation, and whether carbon pricing extends to climate mitigation efforts, contribute to their variable use and ability to drive decision making towards evidenced emissions reductions.
Key actions to use internal carbon pricing metrics:
Generate revenue to fund circular economy projects with the carbon price to raise the investment and capital often required for the initial scaling of circular business models.
Drive internal awareness of how circular business models reduce overall business costs, such as business efforts to adapt to the effects of climate change, for example, comparing the carbon price of a circular business model activity versus the linear model.
5/5 Avoided Emissions
Avoided emissions calculations can compare a forecasted future of two alternatives: one where business-as-usual continues, and another where circular business models exist at scale.
Guidance on avoided emissions is provided by the World Business Council for Sustainable Development (WBCSD) and World Resources Institute.
Illustrative metrics used by the industry:
Emissions avoided by reducing the need for upstream production.
Emissions avoided by increased product use rates through a circular business model
Most useful for communicating with the following stakeholders:
Communications and external affairs
Supply chain management
Limitations of avoided emissions:
Businesses are using avoided emissions due to a lack of inventory emissions guidance for circular business models today. As the calculation of avoided emissions relies on predictions and hypothetical scenarios, it offers a view into the potential emissions impacts of implementing circular business models, rather than evidenced and demonstrable reductions. Lack of standardisation and businesses developing their own avoided emissions methodologies reduces the credibility of avoided emissions claims, especially with increased legislation to prevent misleading sustainability claims.
Key actions to use avoided emissions metrics:
Quantify and showcase the potential climate impact of circular business model offerings compared to a business-as-usual approach.
Forecast how increased revenue from circular business models, compared to the business-as-usual offering, could avoid emissions in the long term. Such as at 5%, 10%, and 25% of revenue today, while accounting for Compound Annual Growth Rate (CAGR).
Vaayu: Working with second-hand marketplace Vinted, Vaayu found that the total net carbon emissions avoided by Vinted's marketplace in 2023 was 679 kilotonnes CO₂e emissions. Vaayu, an all-in-one climate partner, has researched the climate impact potential of circular business models and calculated product footprints at scale. Circular business model innovators often leverage avoided emissions metrics since the concept provides an opportunity to articulate “saved” climate impact, particularly when compared to the linear take/make/waste model. Vaayu have also worked with brands On, Vestiaire Collective, and VEJA, to apply metrics that capture the opportunities across circular design, business models, and GHG emissions.
Valuence Group: Alongside offering preloved and remade items, Valuence Group shares information with customers on the impact of choosing reused products over new products, including avoided emissions. Valuence Group display the avoided emissions on product tags, in-store at pre-owned brand stores in Japan, and on product descriptions on the online store. Alongside efforts to capture the avoided impact, Valuence Group have set GHG reduction targets for Scope 1 and 2 emissions, recognising that absolute reductions are critical.
