Circular business models, like resale and repair of clothing, are a multi-billion dollar opportunity for economic resilience and job creation. But today, the system is stacked against them.
In Canada, the EU, and the US, businesses that resell and repairrepairOperation by which a faulty or broken product or component is returned back to a usable state to fulfil its intended use. clothing are on the rise, creating local jobs and generating revenue. However, they are navigating a regulatory landscape designed for a linear economylinear economyAn economy in which finite resources are extracted to make products that are used - generally not to their full potential - and then thrown away ('take-make-waste').. To allow these models to scale, we must address the structural imbalances that make it cheaper to produce new clothes than to circulate existing ones.
Circular business models are caught in an economic trap
Most fashion brands and retailers are currently incentivised to use virgin materials rather than investing in processes that keep products in use for longer.
Taxation Barriers: Products are taxed at every transaction rather than just at the original point of sale, eroding the margin for resale businesses.
The Labour Challenge: Unlike the linear economy, where increasing production leads to lower costs per unit produced, labour intensive repair and remaking costs don't fall at scale.
Economic Imbalance: Today, only a limited number of resale and repair models can compete with the linear business model. Often this is when collection and sorting come at minimal or no cost, relying on donations or unpaid user labour in peer-to-peer models.
Governments can drive competitiveness and rebalance the economics of fashion by applying three existing policy levers to resale and repair:
Unlocking commercial viability
Our modelling shows that this targeted policy mix can materially improve the economics for circular business models. In Canada, the EU, and the US, these policies could raise gross profit margins to:
This shift provides the commercial viability needed to attract investment and allows businesses to either increase margins or capture a larger market share by lowering the price for customers.
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The new bottom line: Policy levers to scale resale & repair for fashion
A call for policy action
What is needed now is coordinated policy action across finance, environment, and industry portfolios to rebalance the economics of fashion. By taking targeted action, governments can help circular business models ease the pressure on public waste management, reduce carbon emissions, and create local jobs in sorting, repair, logistics and retail.
The momentum for change is real. 69 businesses and organisations across the fashion and textiles industry have already made their position clear by endorsing a business statement calling for policy action.
