Are circular fashion business models actually better for the environment?
Two years ago, Vogue Business published a story about the struggle for circular business models to back up their sustainability claims and quantify their environmental impact. Many of them were relying on the assumption that when people engage with circular business models, they shun new purchases, thereby ‘saving’ the emissions and impacts associated with fashion production. But this calculation — known as the displacement rate — has proven difficult to measure, and a niggling thorn in the side of circular fashion ever since.
Today, the UK-based circularity non-profit Waste and Resources Action Programme (WRAP) released a methodology for calculating and comparing the displacement rate of circular business models, hoping to harmonise the back-of-the-envelope calculations that brands and platforms have created in the meantime. An initial survey of 7,061 UK consumers found that peer-to-peer online resale has a displacement rate of 64.6 per cent, meaning that every three in five secondhand clothing purchases displace a new item — slightly lower than previous estimates. Repair fared better: among the 721 additional respondents using repair services, the displacement rate was 82.2 per cent, or four out of five items.
Rental, resale and repair have risen to the mainstream by claiming to be better for the environment than linear fashion models, but attempts to quantify their impact have been criticised. Experts say better data is needed.
While the numbers are more conservative than previous estimates, industry partners say the standardisation is an important step forward. “We welcome an industry-aligned methodology for calculating the displacement rate,” says Justine Porterie, director of sustainability at Depop, which was part of the survey. “Collaboration with our peers is crucial to reinforce the case for new circular fashion businesses.”
WRAP has key circular fashion players behind it. Secondhand platforms Vestiaire Collective, Ebay and Depop acted as case studies for resale, while alterations services The Seam and Sojo represented repair alongside UK surf brand Finisterre. The methodology can be also applied to rental, notes WRAP senior research analyst Sarah Key, but will need fine-tuning before it can be used for upcycling, which is more complicated due to the addition of new resources.
While momentum towards circular business models has been building steadily over the last few years — prompted by efforts to increase profits while curbing emissions — some have proven complex and costly to scale. If businesses can crack the displacement rate and prove that circularity pays off, it could help validate their claims that circularity is better for the environment and unlock the investment needed to achieve circularity at scale. Having an industry-wide approach will also allow consumers and investors to compare the benefits of different platforms, which WRAP hopes will create a “positive competition” to increase the displacement rate over time.
“The industry and brands can now start to build on this influential knowledge to shape future strategy and engagement,” says Amy Brock-Morgan, head of lived and loved repairs at outerwear and apparel brand Finisterre. “This research has been particularly significant in communicating impact to our brand partners and key industry players to help push for more circular practices,” adds Josephine Phillips, founder and CEO of Sojo, which offers repairs and alterations for partners including Selfridges, Ganni and Arket.
Displacement rate data is highly subjective
To kick-start the process of creating its methodology, WRAP did a literature review of existing approaches to displacement rates, including its own early attempts. The figures vary hugely, with significant changes over time even in the same model, showing just how much displacement rate methodologies have been crying out for standardisation.
Previous attempts to pin down the displacement rate have leveraged consumer surveys taken at different points in the purchasing journey, generic lifecycle assessments for new production across different product types, and information about the specific brands’ or garments’ production processes where available. In 2012, WRAP estimated that the average displacement rate for circular business models was just 28 per cent. A decade later, this almost doubled to 54 per cent. Other estimates went in the opposite direction: Vestiaire Collective calculated its displacement rate at 82 per cent in 2023 before dropping its estimate to 79 per cent in 2024. Vinted’s calculations with software platform Vaayu are among the most conservative, coming in at 39 per cent in 2021 and 40 per cent in 2023. Depop — which calculated its displacement rate with consultancies QSA Partners and Icaro — is the most generous, estimating 90 per cent in 2022.
The methodology WRAP landed on is designed so that individual circular businesses can apply it to their own audience, leveraging representative consumer surveys to understand how likely each transaction is to displace a new purchase. It starts with some generic framing questions to make sure the respondents are representative of the company’s key audience demographics. Then, it asks: “Do you think that (buying/renting/acquiring/repairing) this item has stopped you from buying a brand-new item?”
Using consumer surveys to calculate displacement rates has proved contentious in the past, not least because “humans are terrible at mental accounting” and “answers will have to be adjusted for bias and memory gaps”, says Francois Souchet, managing director of advisory firm Swanstant and former lead of the Ellen MacArthur Foundation’s Make Fashion Circular initiative. Still, WRAP says surveys are the best approach available at scale. The alternatives would be wardrobes studies or volume comparisons, but the former is time-consuming and expensive (requiring companies to monitor their customers’ wardrobes and purchasing behaviour over time) while the latter doesn’t give an accurate picture of displacement (only how fast circular transactions are increasing compared with new product sales).
The other challenge is communicating the displacement rate to consumers without greenwashing, especially when the methods for calculating avoided emissions are just as fiercely debated as whether or not circular business models avoid them. In particular, lifecycle assessments have come under fire in recent years — the EU’s Product Environmental Footprint (PEF) methodology, for example, has been accused of giving synthetic fibres a competitive advantage. WRAP’s Key says there will be pros and cons to any methodology, and the core issue is what we do to minimise those impacts.
How do you increase the displacement rate?
It’s worth keeping in mind that calculating the displacement rate of circular business models is not the end goal, says Souchet. “We have found that brands can impact displacement through numerous decisions linked to the connection between new and circular transactions. As such, measuring the displacement rate might give a static answer to a dynamic problem.” The ultimate aim is to increase the displacement rate and use circularity to effectively curb overproduction and overconsumption.
There are several ways circular businesses can do this, Souchet continues. Confidence that circular business models will deliver can be buoyed by authenticity guarantees and seller verification, as well as traditional e-commerce plays to help people get the right size, look and feel. Convenience can apply to the purchasing journey, as well as where the circular business model is positioned in the broader retail landscape (or website homepage). Incentives could include price, loyalty programmes and discounts. And desirability can be increased through mainstream partnerships (such as Ebay x Love Island), challenging the dominance of newness and normalising circularity through social media and red carpets.
There’s scope to improve WRAP’s methodology in the future, says Key. Right now, for example, the calculation looks at each circular transaction in isolation and cannot account for products that might be resold, repaired, rented or repurposed multiple times through various circular business models. “If you wanted to look at the displacement rate of an individual item over time, you would need to be able to track the journey through digital product passports (DPP),” she explains. “This isn’t currently possible on a large enough scale to give meaningful results, but it could be in future.”
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