The myth of circular fashion economics: A 450 billion dollar miscalculation?

New academic research challenges industry's circularity narrative and exposes fundamental economic flaws. Fashion's circular economy model — long championed as the solution that would simultaneously tackle textile waste, reduce carbon emissions and maintain economic growth — may be built on fundamentally flawed economic assumptions, according to explosive new academic research.

A study from Loughborough University London published in the peer-reviewed journal Frontiers in Sustainability has found that the widely quoted 500bn dollars figure for potential economic savings from fashion circularity may be overestimated by a staggering 450bn dollars.

The research, led by Talia Hussain, conducted a comprehensive analysis of 20 influential reports from non-academic organisations including the Ellen MacArthur Foundation and McKinsey. It found these documents contain poorly defined concepts disconnected from established economic theory, raising serious questions about the viability of current circular fashion approaches.

The fashion industry faces many sustainability challenges which it is, unfortunately, not tackling successfully. "At every stage and every scale, we observe problems. From water and land use, to chemicals, fossil fibres, labour abuse, overproduction and ultimately textile waste," Ms Hussain said in the report. "We can see water overexploitation from space. Polyester microfibres pollute the deepest ocean water and our bodies too. 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."

The circularity paradox

The findings articulate a fundamental tension that many industry veterans have privately acknowledged for years: the inherent paradox between economic growth and circularity objectives, according to Ecotextile News. The research highlights several critical economic contradictions: Circular practices generally reduce profit margins due to increased processing costs and logistical complexities. If production volumes decrease to meet environmental targets, company revenues inevitably contract, further threatening profitability. Extended garment lifecycles fundamentally undermine the manufacturing business model, potentially eliminating commercial value across supply chains.

"We've been hearing whispers of doubt from experienced industry figures for a decade," Ecotextile said in its April issue, where this research was first reported. "Successful entrepreneurs at trade shows and events have long questioned whether proposed circular business models can actually generate sustainable profits."

The employment implications are particularly troubling. A truly circular system could potentially eliminate millions of manufacturing jobs in developing economies while simultaneously rendering obsolete much of the sustainability infrastructure that has emerged in recent years.

Misplaced focus on consumer behaviour

The research also highlights a critical misalignment in how the industry approaches sustainability challenges. While consumer behaviour is routinely positioned as the fulcrum for change, systemic failures within the industry itself — particularly the disposal of unsold inventory and inefficiencies in production — receive comparatively little attention. This critique aligns with what pragmatists have advocated for years: leveraging existing textile technology and infrastructure to produce higher-quality, better-fitting garments that naturally extend product lifecycles. This approach potentially offers the dual benefit of reducing environmental impact while maintaining or even increasing profit margins.

Technology is not the limitation

Perhaps most concerning is the revelation that many necessary technologies for enabling circular systems have existed for decades. The research suggests that technology availability is not the primary barrier to implementation, but rather the fundamental economic incompatibility of circularity with profit-driven business models.

Policy implications

These findings arrive at a critical juncture as policymakers across Europe and beyond develop regulatory frameworks based on circular economy principles. The research suggests that without addressing the underlying economic contradictions, such policies may prove ineffective or even counterproductive.

The researchers call for stakeholders to critically reassess fashion circularity models and explore new approaches that prioritize genuine systemic change, even when this challenges conventional profit models.