Circular Fashion in Action: Turning Compliance into Competitive Edge

The Rise of Circular Fashion

The fashion industry is at a turning point. Under pressure to reduce its environmental footprint, shift away from linear consumption, and comply with evolving sustainability regulations, brands are increasingly turning to circular fashion—a model designed to minimize waste, maximize product lifecycles, and recapture value through reuse, repair, resale, and recycling.

Circular fashion isn’t just an end-of-life strategy—it represents a shift in how fashion is designed, made, used, and reused. From the growing popularity of second-hand platforms to government bans on product destruction, the industry is undergoing a transformation that prioritizes longevity, resource efficiency, and transparency.

This article explores how circular fashion is redefining sustainability through innovation—and how technology is enabling brands to navigate these challenges and seize new opportunities.

Circular Fashion Today: Momentum Meets Market Forces

Circularity is no longer a niche movement. Preloved, rental, and repair services are becoming mainstream, particularly among younger consumers. According to research by global environmental NGO WRAP (Displacement Rates Untangled | WRAP), second-hand fashion is now directly displacing new sales. For every five second-hand items purchased online, an average of three new items are not bought, equating to a displacement rate of 64.6%. Even more notably, clothing repair services show an 82.2% displacement rate—a clear sign that consumers are actively choosing reuse over new.

This trend is forcing brands to rethink their relationship with product ownership and lifecycle management. Marketplaces like Vinted, eBay, and Vestiaire Collective are growing rapidly, while leading retailers are launching in-house resale and take-back programs.

But scaling circular business models isn’t just about capturing resale margins—it requires infrastructure, systems, and technology to manage materials, track product usage, and support responsible recovery at end of life.

From Linear to Circular: Why This Shift Matters

The traditional linear model—make, sell, discard—is incompatible with the environmental and social demands placed on today’s fashion ecosystem. The numbers don’t lie, as the fashion industry is responsible for:

• 8–10% of global GHG emissions
• 92 million tons of textile waste annually
• Widespread labor violations and resource inefficiency

To address this, the EU and other regulators are rolling out frameworks such as the Corporate Sustainability Reporting Directive (CSRD), Extended Producer Responsibility (EPR), Product Environmental Footprint Category Rules (PEFCR), and Digital Product Passports (DPPs)—all of which place the circular economy at the center of the fashion sustainability agenda.

Notably, the destruction of unsold goods is now banned in the EU, with significant penalties for non-compliance. This shift links directly to overproduction and waste, reinforcing the importance of intelligent demand planning and inventory management in a circular model.

Key Strategies and Technologies for Circular Implementation

To successfully transition from a linear to a circular business model, fashion brands must rethink operations across the entire product lifecycle. From design and planning to production and post-sale recovery, each phase must be backed by data, integration, and intelligent systems. The following technologies and strategies are proving essential in this transition.

Measuring Circular Progress: 5 Essential KPIs

To operationalize circularity, brands need to move beyond qualitative goals and track measurable performance. Here are five essential key performance indicators (KPIs) that support circular business models and sustainability compliance:

1. Recycled content percentage
   Measures the proportion of recycled materials used in new garments. A higher percentage indicates reduced dependency on virgin resources and alignment with circular sourcing goals.

2. Product lifespan
   Tracks how long a product remains in use before being discarded, resold, or recycled. Longer lifespans contribute to waste reduction and support EPR reporting requirements.

3. Recyclability rate
   Indicates the share of a product that can be successfully disassembled and recycled. Products with high recyclability rates are better suited for take-back and reuse programs.

4. Waste diversion rate
   Calculates the percentage of waste diverted from landfills via reuse, resale, or recycling. This supports compliance with product destruction bans and EPR legislation.

5. Inventory turnover rate
   Reflects how efficiently inventory is managed. A higher turnover rate typically signals strong demand forecasting and less overproduction, helping brands avoid costly unsold stock.

By embedding these KPIs into ESG and operational reporting, fashion companies gain a clear, quantifiable view of their circularity progress.

Tracking the right KPIs is only half the equation. To improve performance across these circular metrics, brands must enable collaboration, automation, and data integration at every stage of the product lifecycle. The following systems are playing a central role in helping companies move from measurement to execution.

1. Assortment and Merchandise Planning: Preventing Overproduction

With increasing regulatory scrutiny around waste and unsold inventory, assortment planning must evolve from a commercial function into a circularity enabler. Advanced tools now allow brands to:

• Forecast demand by season, region, and channel
• Optimize inventory allocations to prevent overstock
• Model scenarios that balance profitability with sustainability
• Align warehouse and logistics to reduce emissions from redistribution

Effective planning not only reduces markdowns and regulatory risk — it also ensures that products are made to be used, not wasted.

2. Product Lifecycle Management (PLM): Designing for Circularity

Circularity begins at the design stage. PLM platforms allow teams to embed sustainability directly into the development process:

• Select low-impact, certified materials (e.g. Global Organic Textile Standard –GOTS; International Association for Research and Testing in the Field of Textile and Leather Ecology - OEKO-TEX; Global Recycled Standard – GRS; Recycled Claim Standard -RCS)
• Design for durability, repairability, and recyclability
• Model product impact across regions, suppliers, water, carbon, and materials
• Meet Ecodesign for Sustainable Products Regulation documentation needs

With PLM, brands can ensure their design strategies meet compliance requirements, business targets, and consumer expectations for responsible products.

3. Enterprise Resource Planning (ERP): Sustainable Execution

ERP acts as the system of record that connects sourcing, production, and fulfilment. In a circular context, ERP must support:

• Raw material optimization to prevent excess inventory
• Demand-aligned procurement to reduce waste and emissions
• Supplier traceability across all tiers
• Closed-loop inventory management to support resale and recycling

ERP also provides the connective tissue between PLM, warehouse systems, and ESG platforms — ensuring data integrity throughout the lifecycle.

4. ESG Platforms: Capturing and Reporting Circular Data

ESG platforms are essential for tracking and reporting the metrics that matter in a circular economy. They must be able to:

• Collect primary data from multi-tier supply chains
• Enable easy and rapid integration of any solution from a brand’s ESG stack – to complement, not compete with existing solutions
• Align operational data from ERP, PLM, demand forecasting, inventory, sales, warehousing, distribution, and external sources, such as carrier data, with ESG data
• Configure forms, integration, and reports using low/no-code tools
• Identify data quality issues using AI
• Generate audit-ready reports for CSRD, EPR, and PEFCR

Most critically, ESG platforms help brands quantify reuse, resale, recycling, and return rates — providing the transparency needed to validate circularity claims.

Crucially, they must accommodate fast-evolving regulatory requirements. As more countries adopt sustainability disclosure laws, platforms must allow brands to adapt without rebuilding systems from scratch.

5. Warehouse and Shop Floor Control: Operational Sustainability

From factory to fulfillment center, real-time data capture ensures that production and distribution remain efficient and sustainable.

• Shop Floor Control (SFC) systems track energy use, uptime, and defect rates
• Warehouse Management Systems (WMS) optimize stock flow, route efficiency, and reverse logistics
• Integration with planning systems ensures supply aligns with demand

These tools turn sustainability from a reporting function into an operational advantage.

The Role of Digital Product Passports in Circular Fashion

DPPs — mandated in the EU from 2027 — are a foundational technology for circular business models. Each Digital Product Passport carries:

• Material origin and sourcing details
• Design specifications for recyclability or repair
• Manufacturing details and care instructions
• Certified or validated evidence of recycled content, durability, recyclability, and repairability
• Product usage history (e.g. resale, repair, return)
• End-of-life instructions

Critically, it’s the usage history that unlocks compliance with Extended Producer Responsibility (EPR) and drives business insight. Brands can see how long products were used, whether they were repaired or resold, and when they were ultimately recovered or recycled.

The CIRPASS-2 project, funded by the EU, is now testing this infrastructure through 13 lighthouse pilots (six in textiles), proving that real-world DPP implementation can scale circularity across the industry.

DPPs are not a silver bullet — they must be combined with accurate ERP and PLM data, real-time ESG metrics, and insights from resale and repair platforms. But together, they provide the system intelligence needed to make circular fashion real — and measurable.

Case Studies: Circular Innovation in Action

MUD Jeans
Pioneers of the "Lease A Jeans" model, MUD offers denim on a subscription basis, then collects and recycles the returned jeans into new products. The result? Lower waste, longer lifecycle, and full material reuse.

Houdini Sportswear
With take-back programs, repair services, and product rentals, Houdini has created a fully circular ecosystem. Its Mono Air fleece is designed to reduce microplastic shedding and is supported by transparent sustainability data.

COS Resell
Part of the H&M Group, COS launched a branded resale marketplace allowing customers to list pre-owned garments directly. This initiative not only extends product life but generates valuable data on post-purchase behavior.

Conclusion: Circularity is the New Standard

Circular fashion isn’t just a trend or a compliance obligation — it’s a strategic opportunity to build long-term resilience, gain competitive advantage, boost profitability, and strengthen brand trust. The shift is already happening, and the technology exists to make it operational, scalable, and measurable.

Brands that embrace this change now — by investing in the right systems and strategies — will not only meet regulatory demands, but position themselves as leaders in sustainability, innovation, and long-term value.

Visit us at BlueCherry.com to learn more about how our ESG platform equips sustainability, supply chain, and compliance teams to lead in the era of circular fashion.