Circular Economy

New Study Challenges Circular Fashion’s Sustainability Potential

The devil’s in the details: Researchers assert circular fashion’s economic and environmental benefits have been grossly overstated, and more clarity and due diligence are critical.

Published 3 weeks ago | About a 5 minute read

Image: Coachtopia

A new study reveals that circular fashion (CF) – the practice of recycling, reselling and renting clothing to reduce waste – might not be the sustainable solution it’s purported to be.

While the concept is promising, a new study from Loughborough University London’s Institute for Creative Futures uncovers major flaws in how circular fashion is being implemented and discussed.

Despite widespread assertions that CF can recover over $500 billion in lost value annually through resale, rental and recycling, the research reveals a $460 billion miscalculation that casts doubt on these projections.

Published in the journal Frontiers in Sustainability, The Emperor’s Old Clothes evaluated 20 key reports from grey literature (non-academic industry publications) – from organizations including the Business of Fashion, Circle Economy, the Ellen MacArthur Foundation, the International Labour Organization, PwC, UNEP and more. It found that CF concepts are poorly defined, disconnected from academic economic theory, and ultimately serve the interests of dominant fashion brands rather than consumers or workers.

The Emperor’s Old Clothes echoes a 2021 study in which a team of British and Swedish researchers warned the definition of a circular economy is unclear and lacks substance. As principal author Hervé Corvellec pointed out: “Criticism of the circular economy does not challenge the concept of circularity. Rather, it is a case of how the supposed benefits are based on inconsistencies, an incomplete picture, hidden assumptions, agendas and unclear consequences.”

The Loughborough study digs further into these points and cautions industry players and policymakers from pinning too much hope on the potential for circular models to address fashion’s sustainability issues without further due diligence.

“The fashion industry faces many sustainability challenges which it is, unfortunately, not tackling successfully,” says lead author Dr Talia Hussain, a visiting scholar at Loughborough. “At every stage and every scale, we observe problems. From water and land use, to chemicals, fossil fibers, labor abuse, overproduction and ultimately textile waste.

“Our paper shows that that the circular fashion solution, which has been embraced by governments and industry, does not stand up to the slightest scrutiny,” she adds. “The authors of a flagship circular fashion report have added $460 billion they should have subtracted. Overproduction, which anyone can see in the never-ending sales on the high street, is not addressed.”

Addressing overproduction in fashion is a central mission of the Or Foundation — whose “Speak Volumes” campaign aims to foster greater transparency within the fashion industry by encouraging brands to publicly disclose their production volumes by item. As Or founder Liz Ricketts explained in a recent post: “Given that the industry currently recycles less than 1 percent of clothing into new clothing, we question how emerging recycling solutions alone can possibly catch up — the investments made by brands in fiber-to-fiber recycling technologies will be futile if not paired with transparency on current production volumes and a concerted effort to reduce the production of new items made from virgin materials.”

The Loughborough team says the CF literature reviewed ignores overproduction by focusing on changing consumer behavior while overlooking the fashion industry's routine disposal of unsold and returned stock — which weakens CF’s ability to address the root causes of waste.

In 2024, the Ellen MacArthur Foundation launched The Fashion Remodel initiative — which brings together high-street and high-end fashion brands and other industry players to identify solutions and opportunities to begin decoupling revenue from the production of new garments — but the industry is still largely fueled by the conventional model of churning out new clothes.

Other key findings

Flawed economic assumptions: Circular business models (CBMs) including resale and rental generate lower profit margins than new product sales. If CBMs successfully reduce new production, fashion revenues will shrink — contradicting CF’s economic promises. If they merely supplement new production, environmental benefits will be negligible.
Misguided policy recommendations: Reports rely on business jargon and inconsistent definitions of ‘value chain,’ leading to superficial policy prescriptions that fail to address systemic issues.
Labor concerns overlooked: The shift to lower-margin circular models is unlikely to improve wages or working conditions for garment workers, the majority of whom live in the Global South. Instead, it may lead to even more precarious employment in sorting and recycling of secondhand clothing.
Industry-controlled sustainability discourse: Consulting firms such as McKinsey and global leadership organizations shape CF policy without rigorous scrutiny, reinforcing the power of dominant fashion brands while sidelining alternative models such as degrowth and sufficiency.

The research warns that CF, in its current form, is built on unrealistic projections and industry rhetoric rather than substantive economic and environmental solutions. By prioritizing corporate interests and maintaining the status quo, CF risks creating new problems instead of solving existing ones.

The study urges academics, policymakers and industry stakeholders to critically reassess CF narratives and explore alternative approaches that prioritize systemic change over profitability. Future sustainability efforts must be grounded in robust empirical research rather than unexamined advocacy.

“The failure to address the elephant of overproduction demonstrates the concept’s opposing alignment to degrowth or sufficiency approaches which demand the end of unnecessary production,” the authors conclude. “A new fashion paradigm is needed; however, we argue that CF should be understood as one proposal among many that have not been promoted, funded, supported or yet developed to meet that need.”