Circular strategy Fashion

Focus areas Circular Fashion/Circular Economy

Based on an internal evaluation of the endeavors on changing the Fashion industry towards circular business models, in this blog, I will enlighten some trends that can be seen. 

Systems change

Circular economy has a clear perspective for fashion: create an industry that can be identified as a ‘force for good’. From a circular perspective this implies fundamental changes in the industry as well B2C as B2B. This brings two basic needs: ‘optimization’ is the first relevant need. The fashion/apparel industry has an enormous negative impact (externalities) on people's lives (inequality) and climate, ‘plastic oceans’, water quality, biodiversity, resource depletion and pressure on waste systems. Addressing these issues has a short -term perspective, this is why we should choose to create a balance in ‘optimization’ and ‘systems change’. Optimization/efficiency is aimed at actual problem solving. Examples are ZDHC (Zero Discharge of Hazardous Chemicals) and Canopy (saving forests). Where systems change/effectiveness is key, we see projects like Fashion for Good, the ‘Bridging the Gap’ initiatives on implementation of circular business models and all kinds of advocacy initiatives. See the differences depicted in the schedule below.

Service-based

In Circular Economy the key element of new business models is the focus on ‘performance-based contracting’. This has been translated by businesses into service-based contracting as the core of the CBM’s in fashion. This is not with a focus on individual products but on the customers’ needs and hidden-needs: service them in their lifestyles. There are two reasons for this development:

  1. Individual products in the fashion industry have a reasonable ‘low’ value, which means that leasing-contracts are inconvenient and mainly to expensive in their management. Inconvenient because the consumer has 50+ products in their closets and have a lease-contract for each item would create ‘chaos’ in their financial administration. To expensive is mainly a worry on the side of the companies: managing each of these contracts would take too much time (and money) in their management and
  2. Consumers are looking for exploration of their individual lifestyles, which means that standardization is not really an option. Fashion as a service is an option, because then the focus is on facilitating lifestyles and not on individual products.

So, what are the characteristics of such services? Here we see three elements that are the basics of services:

  1. Ownership of the products stays with the professionals, whether it is the producer or the retail or a styling-specialist, the consumer becomes the user. Ownership implies responsibility and professionals are far better equipped to understand the consequences of this responsibility. This is why ICE does not pledge for ‘extended producer responsibility’ as policy development but sees the need for ‘full producer responsibility’;
  2. Usership of fashion means that the professionals provide the customer/user with the right fit to their lifestyle, in practice it is often described as professional management of the closet. The products in this service approach become ‘assets’ in the business case of the professionals and as well known in business rationales: asset management is key for economic value and
  3. Longer lasting relations between the service provider and the customers are elementary for a good service contracting: the service provider needs to know the customer and helps the customer to develop his/her style over time. Longer lasting connections are a strong basis for business continuity.

Many examples of circular fashion, in the B2C-domain, at the moment, are not fundamentally circular mainly because the changes to services and usership/ownership are not part of the deal flows:

  • Sharing: is a strong development in the market, though mainly unseen and part of the informal market. Millennials use each other’s closets as a source for clothing. One example of a serious business case is the development in social entrepreneurship, like ‘Lena, the Clothing Library’. This can be seen as an experiment for the industry, where quite some knowledge can be harvested on users/members behaviors and choices;
  • Re-use: the growth of vintage fashion, trade on Vinted and other sites, small shops, thrift stores and even in retail brands (Burberry e.g.) is a good extension of product-life but mainly attracts new customers to brands, the existing customer will not change;
  • Repair: many pieces of apparel go into the waste-system because of technical issues (small: missing buttons, big: change of style or change of body/fit) which could be repaired, that market seems to be growing also. It brings a better longevity for garments and
  • Recycling: collect for recycling is initiated by many brands now a days. It helps to get garments in the right part of the recycling industry. Recycling brings normally an enormous decrease in value and should be the last step. The focus on recycling is more or less ‘waste-policy’ instead of being elementary in the circular economy. Of course, at the end of the product life recycling of materials is needed, but that needs a strong focus on ‘design for use, re-use and recycling’ in the industry: a responsibility that is not yet taken overall.

The other phenomena in the market is “Rental”: known as a good business model for party gowns and suits/tuxedo’s already since a long time. This is quite a good model as a CBM. Now this is a niche-market and normally very specialized. Longevity is key for the business case as well as design and ‘uniqueness’. The element of service is not really around in this retail domain, the customers find their way to the rental shop incidentally (which means incident by incident) and there is no long-term commitment or contractual relation between the rental-provider and the user(s).

Fashion as a Service (FAAS) is the generic terminology for new business models, based on performance (support the customer’s lifestyle), responsibility (professional has responsibility), products as assets and value creation and value maintenance. Practically: the retail becomes service-provider!

Plotted, this would mean:

Service-based

In Circular Economy the key element of new business models is the focus on ‘performance-based contracting’. This has been translated by businesses into service-based contracting as the core of the CBM’s in fashion. This is not with a focus on individual products but on the customers’ needs and hidden-needs: service them in their lifestyles. There are two reasons for this development:

  1. Individual products in the fashion industry have a reasonable ‘low’ value, which means that leasing-contracts are inconvenient and mainly to expensive in their management. Inconvenient because the consumer has 50+ products in their closets and have a lease-contract for each item would create ‘chaos’ in their financial administration. To expensive is mainly a worry on the side of the companies: managing each of these contracts would take too much time (and money) in their management and
  2. Consumers are looking for exploration of their individual lifestyles, which means that standardization is not really an option. Fashion as a service is an option, because then the focus is on facilitating lifestyles and not on individual products.

So, what are the characteristics of such services? Here we see three elements that are the basics of services:

  1. Ownership of the products stays with the professionals, whether it is the producer or the retail or a styling-specialist, the consumer becomes the user. Ownership implies responsibility and professionals are far better equipped to understand the consequences of this responsibility. This is why ICE does not pledge for ‘extended producer responsibility’ as policy development but sees the need for ‘full producer responsibility’;
  2. Usership of fashion means that the professionals provide the customer/user with the right fit to their lifestyle, in practice it is often described as professional management of the closet. The products in this service approach become ‘assets’ in the business case of the professionals and as well known in business rationales: asset management is key for economic value and
  3. Longer lasting relations between the service provider and the customers are elementary for a good service contracting: the service provider needs to know the customer and helps the customer to develop his/her style over time. Longer lasting connections are a strong basis for business continuity.

Many examples of circular fashion, in the B2C-domain, at the moment, are not fundamentally circular mainly because the changes to services and usership/ownership are not part of the deal flows:

  • Sharing: is a strong development in the market, though mainly unseen and part of the informal market. Millennials use each other’s closets as a source for clothing. One example of a serious business case is the development in social entrepreneurship, like ‘Lena, the Clothing Library’. This can be seen as an experiment for the industry, where quite some knowledge can be harvested on users/members behaviors and choices;
  • Re-use: the growth of vintage fashion, trade on Vinted and other sites, small shops, thrift stores and even in retail brands (Burberry e.g.) is a good extension of product-life but mainly attracts new customers to brands, the existing customer will not change;
  • Repair: many pieces of apparel go into the waste-system because of technical issues (small: missing buttons, big: change of style or change of body/fit) which could be repaired, that market seems to be growing also. It brings a better longevity for garments and
  • Recycling: collect for recycling is initiated by many brands now a days. It helps to get garments in the right part of the recycling industry. Recycling brings normally an enormous decrease in value and should be the last step. The focus on recycling is more or less ‘waste-policy’ instead of being elementary in the circular economy. Of course, at the end of the product life recycling of materials is needed, but that needs a strong focus on ‘design for use, re-use and recycling’ in the industry: a responsibility that is not yet taken overall.

The other phenomena in the market is “Rental”: known as a good business model for party gowns and suits/tuxedo’s already since a long time. This is quite a good model as a CBM. Now this is a niche-market and normally very specialized. Longevity is key for the business case as well as design and ‘uniqueness’. The element of service is not really around in this retail domain, the customers find their way to the rental shop incidentally (which means incident by incident) and there is no long-term commitment or contractual relation between the rental-provider and the user(s).

Fashion as a Service (FAAS) is the generic terminology for new business models, based on performance (support the customer’s lifestyle), responsibility (professional has responsibility), products as assets and value creation and value maintenance. Practically: the retail becomes service-provider!

Plotted, this would mean:

Design Thinking in Circulaire Economie

  • in Dutch… sorry for the English readers..

CCC-incorporated

Design thinking Circular Economy: Co-creation, Creative and Collaborative

 

Het proces om tot implementatie van circulaire economie te komen in bedrijven, bij overheden en in instellingen vraagt intensieve aandacht. In praktijk zien we een kloof ontstaan tussen de ‘mooie gedachte’ en de praktische in- en uitvoering. Met andere woorden: de theorie is mooi, de praktijk vaak moeizaam. Om in innovatie termen te zeggen, er is sprake van een ‘Valley of Death of Implementation: the implementation-gap’. Dat is de huidige praktijk. Ruim 45% van alle bedrijven in Nederland kent de terminologie en een flink deel daarvan de basisprincipes, zoals van eigendom naar gebruik. Maar toepassing van de onderliggende businessmodellen vraagt meer dan alleen kennis ervan hebben. Al in de eerste publicatie over circulaire economie van de Ellen MacArthur Foundation[1] werd aangegeven dat de omslag naar de nieuwe businessmodellen vraagt om ‘Re-think and Re-design’. Kernachtig en waar, zo blijkt nu in de praktijk.

Design thinking als sleutel

Re-think and Re-design’ vormen de basis voor het proces dat kan leiden tot daadwerkelijke invoering van circulaire werkwijzen in bedrijf en instellingen (in hun beleids- en bedrijfsvoering). Het is een vorm van organisatieverandering waarbij alle theorieën uit de managementliteratuur een plek kunnen vinden. Er is echter een grote ‘maar’ te benoemen als die theorieën worden gevolgd: ze zijn allemaal ontstaan in de huidige, lineaire, economie en organisatiestructuren die daarbij passen.

Met ‘Design’ refereren we vooral aan het werkwoord ‘ontwerpen’. En wat in het algemeen geldt voor ‘ontwerpen’, geldt voor ‘Circular Design’ wellicht nog sterker: het gaat om het combineren van inhoudelijke, multi-disciplinaire kennis, én om het proces, de aanpak (‘Design thinking’) om tot een goed, gedragen en wellicht zelfs enthousiasmerende ontwerpen te komen. Allerhande Nederlandse ontwerpbureau’s en bedrijven hebben met beide jarenlange ervaring. Project CIRCO van CLICKNL, voegt aan deze stevige basis nieuwe kennis toe, evenals een aanpak specifiek gericht op ‘Dutch Circular Design’.

Dit vraagt nog een verdere inspanning, waar ICE een rol bij kan en wil spelen:

  1. Breed introduceren van ‘Design Thinking’ als basis voor introductie en implementatie van circulaire economie en de bijbehorende businessmodellen. Dit vraagt inspanning in publiciteit, contacten met bedrijven en bedrijvennetwerken, inzet in publieke domein (onderdeel transitiepaden I&M maar ook op lokaal/regionaal niveau);
  2. Bouwen van netwerken ‘Design Thinking CE’ die ondernemend, service-verlenend, verdiepend én iteratief bijdragen aan de implementatie van circulaire businessmodellen, mét bijbehorende services en assets/producten. In deze netwerken is een goede kennis- en vaardighedenbasis noodzakelijk;
  3. Zichtbaarheid versterken van ‘design thinking CE’ als proces instrument om tot soepele realisatie en implementatie van CE te komen in publieke en private organisaties. Er is al veel ervaring in Nederland maar de zichtbaarheid is beperkt. Naast de directe zichtbaarheid van CIRCO (classes en tracks) is de waarde van het procesinstrument ‘design thinking CE’ nog betrekkelijk onzichtbaar;
  4. Verdieping Design Thinking CE is nog wenselijk. Er is een relatie met de methoden die gebruikt worden bij service design, product design en creatie van nieuwe bedrijfsmodellen. Een eerste “toolkit design thinking CE” is nodig.

 

Over needs en hidden-needs

Design thinking als instrument voor de implementatie van circulaire economie en dus de bijbehorende businessmodellen richt zich met name op de realisatie van services. In praktijk is dit de vertaling die ‘performancebased contracting’ krijgt. De producent/provider levert niet alleen een product maar vooral de prestatie waar de gebruiker behoefte aan heeft. Daarmee ontstaat een systeem van services waarbij de producent/provider de ‘apparaten’ die de service tot stand brengen, onderdeel blijven van hun bedrijfsvoering (assetmanagement). Kern is het leveren van services die aansluiten bij de ‘needs & hidden needs’ van de gebruikers. Servicedesign is sterk gericht op de identificatie van de beide ‘needs’ en de bijbehorende services. Dit is ook een nog relatief jong vakgebied waarin Nederlandse bedrijven als ‘Design Thinkers’ een leidende rol hebben. De aansluiting van service design bij de ontwikkeling van ‘design thinking CE’, als strategie bij implementatie van circulaire economie in praktijk bij bedrijven, overheden en instellingen, is wenselijk.

 

Rethink & Redesign

Deze uitspraken van de Ellen MacArthur Foundation bij de introductie van de circulaire economie blijken van cruciale waarde voor de implementatie strategieën.

Rethink roept de producent/provider op om het bestaande businessmodel tegen het licht te houden en te zoeken naar een model waarbij materialen hun waarde behouden. De producentenverantwoordelijkheid krijgt daarmee een nieuwe context, die van de interne logica. Als producten worden gezien als bedrijfsmiddelen (assets), is een adequaat beheer en daarmee gepaard gaand design, zinvol en zelfs een basale verantwoordelijkheid in de bedrijfsvoering.

Redesign roept op tot herontwerp van producten, services en de nieuwe bedrijfsmodellen cq handel. CIRCO biedt hiervoor reeds classes en tracks aan, waarbij deze elementen van ontwerp aandacht krijgen. Een volgende stap is de bedrijven ook intern te helpen middels ‘design thinking CE’: de nieuwe bedrijfsvorm, de nieuwe eisen aan producten en het ontwikkelen van de services vragen co-creatie van ‘alle’ spelers binnen een bedrijf (of dat nu een publiek of privaat bedrijf is). Implementatie vraagt een gedragen reeks keuzes op alle niveaus. Die niveaus zijn te kenmerken als: richten, inrichten en verrichten. Op RVC/CEO niveau geeft men de richting die het bedrijf inslaat, het inrichten geeft aan welke nieuwe procedures en processen nodig zijn (denk aan nieuwe finance etc) en bij het verrichten van de operaties krijgen productontwerp, ontwerp van services praktische invulling.

Design Thinking CE werkt in eerste instantie met vertegenwoordigers in het bedrijf van alle categorieën.  In een proces van co-creatie worden prioriteiten en ontwikkelrichtingen gegeven, die vervolgens een verdiepende slag in het design thinking CE krijgen.

 

 

Design Thinking CE

In de toolbox ‘Design Thinking CE’ (in ontwikkeling) worden methoden beschreven (en voorzien van alle noodzakelijke technieken) om het process van Design Thinking CE te kunnen faciliteren. Dat vraagt aandacht voor:

  1. Systeemdenken analyse van het systeem waar de product/service een plek vindt. Wat zijn de specifieke kenmerken? Welke condities spelen een rol? Is er sprake van grenzen aan gebruik en groei? Huidige positie van het bedrijf/instelling en wenselijke positie? Hoe is de relatie met gebruikers nu en op langere termijn?
  1. Needs & hidden needs analyseren om zicht te krijgen op de werkelijke vraag van de gebruiker (een auto of kilometers kunnen maken?)? Onderscheid in marketing-denken en service denken? Learning journey om in gesprek met de gebruikers te komen? In hoeverre is er sprake van co-creatie? Welke binding met de gebruiker wordt gezocht?
  1. Create / open opportunities eerste fase van ontwerpen: creatieve fase waarin gezocht wordt naar onorthodoxe oplossingen, een radicaal gebruikersperspectief, de ideale faalfactoren, de ongelimiteerde en ongedachte mogelijkheden. Veelal een fase van open gedachtenwisseling, de braindump (nou ja, brainstorm), onbegrensde creativiteit benutten als visionaire basis. Resultaat: bouwstenen voor een eigen visie.
  1. Generate nieuwe businessmodellen, bijbehorende services en designrichtlijnen voor de bijbehorende producten (assets). Resulterend in een intern uitvoerbare veranderingsstrategie gericht op daadwerkelijke implementatie.

 

Design Thinking CE geeft vorm en inhoud aan een actieve implementatie van circulaire economie en businessmodellen voor bedrijven, overheden en instellingen. Het gebruiken van design thinking als methode is noodzakelijk om de ‘onorthodoxe maatregelen’ acceptabel te maken en tot een gedeelde uitvoeringsstrategie te komen.

De werktitel CCC-incorporated geeft aan dat het gaat om een aanpak die zich kenmerkt door CCC: Creative Co-creation and Collaborative action.

Uiteraard met de blik op ‘getting it incorporated

Graag reacties!!

 

[1] Towards a Circular Economy, Ellen MacArthur Foundation 2012

The CE-Implementation Gap

Working on circular economy, for about 8 years, I see a 'problem' dawning. It is a strong trend that can be identified in our activities with a focus on implementation of circular business models in public and private companies/organisations. This is the 'Valley of death of implementation CE'.

First I would like to point out the basic strategy that we use to enhance the quality and attention for circular economy is the 3i-strategy: inform, implement and innovate. We perceive this as the most practical order of working. What do we see as crucial in these three phases:

Inform

This basically is: just telling people about the why, how and what of circular economy. Not based on ideology but based on sound economical perspectives. Economical aspects are mostly based on business-continuity through new forms of contracting and therefor new relations between providers and users. Underlying is of course the availability of resources, the waste of materials, decline of ecological values and neglect of social quality. Circular economy implies re-thinking and re-design of services and products: the way your business does business. This line of working is very successful in the Netherlands. In the last years we were able to reach out to about 45% of all companies: they are -more or less- familiar with the concept. First the larger companies and more and more with small and medium enterprises (SME's) and we proceed this with at least 25 local meetings on Circular Business throughout the country.

Implement

On all kinds of levels the implementation has begun. Frontrunners are as well companies as (local) authorities. They are working on new business models, new services, new purchasing and creation of the conditions for growth of the circular economy. Each in his/her own role. Dutch governments (national and local/regional) give circular economy a strong emphasis, though realisation brings new procedures and new relations with private partners. Companies try to change their business models and have different levels of succes. Common problem: the availability of 'time to change' and the existing interests and need for market positions. Here the 'Implementation Gap' becomes visible.

Innovate

The circular perspective and the new way of perceiving reality brings the need for innovations, on products, on services and business models. In other words this is about innovation on realisation, organisation and systems level. Not always an easy jobs, since there is a world of complexity connected to these innovations.

the Valley of Death Implementation CE

We are all familiar with the Valley of Death in the innovation theories. An innovator has a technical innovation and sees a high value in the market. The market does not respond to many of these innovations and in the end there will not be a good business case and the innovation ends in the 'valley of death'.

In circular economy we see an other valley of death between the phase of inform and the second phase implement. Enthusiasm is around, but it lacks time, attention and the readiness to change in organisations. The is where we can make a difference, based on three kinds of initiatives:

First: Go Middle-out!

In our current society there seems to be a strict order between public and private initiatives. Many initiatives come from individual businesses, start-ups or the 'energetic society'. In the mean time, governments on all levels, tend to create 'plans for action' (Roadmaps, Policy planning, Transition Arena's e.g.). So top-down we see plans and some activities, often with a focus on creating awareness or capacity development. On the other hand the initiatives that can be seen as: bottom-up. One of the basic principles of circular economy is collaboration, so why don't we work far more often from the perspective: middle-out. The local, regional and (inter-)national governments create conditions for growth of the circular economy. The best example is the purchasing quality of public partners: the biggest customer of the country (at least in the Netherlands) becomes a 'launching customer'. That gives companies, the private parties, room for change! Do not ask for a product, ask for services that can be the result of a collaborative endeavour!

Second: Provide practical support!

Knowledge and insights are mostly based on specialisms in waste- or resource management. Circular Economy needs to elaborate the changes in business models, new relations between provider and users. In the Netherlands we have a strong group of people who were involved in the development of the Circular Economy from the early days. They have gained insights in successful and failed initiatives as well in the private sector as the public domain. Use them to enhance the quest for circular business models in a broad variety. Some of these specialists are small scale organisations or independent professionals: see them, hear them, feel their value!

Three: Use design thinking!

Circular business implementation is not just an activity based on marketing or external communication. It is a process of change throughout the whole organisation/company. People are always hesitant to implement the idea of others, maybe the 'not invented here' syndrome, but al least an often seen effect. Recently we saw in one of the bigger public procurement procedures that the offers bij consortia of companies were made, based on a internal design proces. Not only the technicians were involved but also personnel from supportive parts of the companies: secretaries, maintenance technicians, marketing and other external communicators. In the end it was (at least in the most successful consortium) a proces of design thinking. The power of design thinking is the connectivity with the new way of working, new services and the whole organisation. It brings enthusiasm, collaboration, power of ideas for change together. So use the power of design thinking as a strong methodology for implementation of circular business models.

1000 listeners, 10 doers? Let us go from 1000 listeners to 500 scouting and 500 implementing circular business models!

Ten Commandments for the Circular Economy

 

Circular Economy is growing fast in individual companies but also on regional, national and global level. Though we see a transformation from ‘preacher to salesman’ in the world of sustainable development, we need to see the essentials over and over again. In my blogposts I try to give insights in the developments that can be helpful for initiators in business and governments. Use these ten commandments as they should be used: feedstock for your personal growth and development. Dare to take them as a starting point for further development and thinking in new perspectives. Circular Economy is not just the actual economy with some basic feedback, it is a new way of organizing your business and policies. And we are still learning!

 

  1. Thou shall give the consumer services based on more than one solution: diversity is key

 

  1. Thou shall create services that lower the costs of access

 

  1. Thou shall share knowledge and invest in education

 

  1. Thou shall deliver the best or even better functionalities

 

  1. Thou shall increase and simplify transparency in chain(s)

 

  1. Thou shall design for disassembly and services

 

  1. Thou shall co-create the ‘Ecology of Things’

 

  1. Thou shall see circular economy as the new normal

 

  1. Thou shall work on sharing assets based on the idea ‘less is more’

 

  1. Thou shall apply abundancy as an economic and ecologic principle

 

 

Douwe Jan Joustra

April, 2017

10 circular essentials

Circular essentials is a new view on the development of circular economy and creating circular businesses. Based on the change from deliverance of products towards the next step, the product as a service, to the essential change: service is the product!

In my work as consultant on implementation of circular economy, I see that discussions tend to focus on materials, materials management and waste reduction and/or recycling. Also I see that discussions tend to become more and more difficult though in my opinion circular business is not too difficult and not even a revolutionary change. Read the 10 circular essentials to understand my picture…

circular-essentials