Circularity in

Textiles
March 2023

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About this document
What you will find in this Key contact
document Whom to contact

Framework for assessing product Per-Anders Enkvist Stefan Fahrni Eric Hannon
Partner, Stockholm Associate Partner, Zurich Partner, Frankfurt
circularity and key circular levers, shortly
described
Short introduction to quantification tool Per Klevnäs Maud Best
“LOOP”, including key outputs Robert Westerdahl
Partner, Stockholm Engagement manager,
Partner, Stockholm
Amsterdam
A short introduction to circularity in the
textile industry
Key contacts for further information Cindy Ruiter Giulia Reggiani Adrian Tuiu
Solution Associate, Solution Analyst, Solution Analyst,
around how getting practical around Geneva Amsterdam
circularity Amsterdam

Julyeon Seo Gertjan Verkerk Roos Klaassen

What you will not find in Solution Associate, Solution Analyst, Solution Analyst,
this document Amsterdam Amsterdam Amsterdam

Single source of truth or detailed end- Melanie Zott Anna Teiwik Natascha Nagler
to-end approach for circularity Junior Specialist, Expert, Stockholm Solution Associate,
Stockholm London
assessment across sectors
An exhaustive step by step guide for a
circularity engagement Further reading Water accounting for circularity in the Circularity in fashion: PD 882947
An in-depth description of circularity in textile industry
textiles and its drivers Circularity offering: Getting practical
about circularity (CxO document 902077)
McKinsey & Company 2
Content

Introduction to the textiles industry

Introduction to LOOP
Archetype Sweater
Real life examples
Appendix

McKinsey & Company 3

The clothing industry is based on a take-make-waste model; >97% of
materials come from virgin feedstocks & 73% is landfilled or incinerated

12% 2%
cascaded losses during collection
2% recycling2 and processing
<1%
recycled feedstock closed-loop
from other industries recycling1

53
>97% million tonnes
virgin feedstock Annual fibre production 73%
Plastic (63%) for clothing USE landfilled or
incinerated
Cotton (26%)
Other (11%)

12% 0.5 million tonnes

losses in microfibre leakage4
production3

1. Recycling of clothing into the same or similar quality applications; 2. Recycling of clothing into other, lower-value applicatins such as insulaiton material, wiping cloths, or mattress stuffing; 3. Includes factory offcuts and overstock liquidation;
4. Plastic microfibres shed through the washing of all textiles released into the ocean.

Source: Circular Fibres initiative analysis via Ellen MacArthur Foundation McKinsey & Company 4
The textile industry is resource intensive, and the negative
impacts are expected to increase towards 2050

2015 2050
Resource
Consumption1
98 million tonnes 300 million tonnes

Textiles industry’s
share of carbon
budget2
2% 26%

Microfibers in the 22 million tonnes added between

2015 and 2020
ocean

1. Consumption of non-renewable resources of the textiles industry, including oil to produce synthetic fibres, fertilisers to grow cotton, and
chemicals to produce, dye, and finish fibres and textiles 2. Carbon budget based on 2 degrees scenario

Source: Ellen MacArthur Foundation McKinsey & Company 5

Given the resource intensive nature of the industry, circularity spans multiple
impact areas, from virgin material use, to pollution & land use
Key numbers on the impact of the fashion industry
Focus of LOOP tool

Virgin material use CO2 emissions Water use Chemicals release Land use

53 10% 93 0.5 5%
million tonnes Global CO2e billion m^3 million tonnes Global cultivated
Annual fibre emissions Annual water use to Plastic microfibers land
production for More than flights produce clothing are yearly dumped Dedicated to
clothing and shipping in the ocean producing fibers for
combined clothing

Source: UNEP | Ellen MacArthur Foundation | WorldBank McKinsey & Company 6

Content

Introduction to the textiles industry

Introduction to LOOP
Archetype Sweater
Real life examples
Appendix

McKinsey & Company 7

 McKinsey’s circularity tool LOOP … by analysing 20+ circular levers and
provides a complete overview of their combined impact on key metrics
circular impact potential…

Specify
Example Circularity Cost Curve (CCC) for a Sweater 1 framework &
applicable
(custom) levers

1a 1b

Can provide view

of Circularity
impact from
combined set of
levers

I. Material Recirculation II. Materials Efficiency III. Circular Business Models

Allow comparison
1a Source recyclates 4a Reduce waste 6a Sharing 7c Durability
across multiple
1b Recycle closed loop 4b Valorize waste2 6b Leasing 7d Care impact metrics
3a Design for recyclability2 5a Redesign product 6c Reuse 8a Reduce over-
3b EOL take back production
7a Repair

1. Looking at use cycles of a product portfolio and not individual product McKinsey & Company 8
2. Virgin material saved not captured by company itself, but positive business case caused by selling the waste
Starting point for LOOP is The Circularity Framework: Circularity can
reduce the amount of virgin materials required in three ways

III. Circular business

I. Materials recirculation II. Materials efficiency
models

Virgin materials Virgin materials Total materials Product

Useful service Total materials Product Useful service

Example 1: kg virgin materials per kg virgin materials per kg kg total materials per car Nr of cars per passenger-km
Passenger passenger-km total materials
car

Example 2: kg virgin materials per use kg virgin materials per kg kg total materials per Nr of vacuum cleaners per
Vacuum cycle total materials vacuum cleaner use cycle
cleaner

McKinsey & Company 9

8 circularity lever categories can be mapped across the
Circularity Framework, with a standard total of 20 customizable levers
I. Materials recirculation II. Materials efficiency III. Circular business models
Virgin materials Total materials Product Virgin materials

Total materials Product Useful service Useful service

1. Recycling materials
a) Source recyclates: Replace virgin materials
with recycled materials with the same product
specification, e.g. souring recycled steel
b) Recycle closed loop: Closed loop of
production scrap, e.g. steel, aluminium
c) Recycle allowance: Product design to
allow for increased use of recycled
materials, e.g. adjust specifications to allow
for more use of recycled PET
2. Remanufacturing of components
a) Remanufacture internal: reuse of
components in new products
b) Remanufacture external: Sourcing of
reused components externally, e.g. rebars
for new buildings
3. Optimizing for recirculation
a) Design for recyclability, e.g. avoid mixing
different plastic types together, modular
design1
b) End of Life take-back, e.g., investment into
EoL collection logistics
4. Reducing and valorising waste
a) Reduce waste: Reduction of net process
scrap, e.g. by 3D printing or better stamping
processes
b) Valorise waste: External valorisation of
process scrap, e.g. selling process scrap for
recycling instead of putting it on landfill1
5. Optimizing design & specifications
a) Redesign product: New product design
(with or without change in production
methods) to allow for lightweight, e.g. shift
shape of packaging, prefabrication of
building structures etc.
b) Rethink value proposition: Variation in
size to match different user needs, e.g. not
all cars to carry 5 seats
c) Redesign materials: Use of high-
strength/high-performance materials to
allow for lightweight, e.g. shift to high-
strength steel, reinforce with carbon fibre
6. Increasing utilization
a) Sharing: Sharing business model with
product as a service, e.g. car sharing
b) Leasing: Longer-term rental/lease, e.g.
subscription model for a laundry machine
c) Reuse: 2nd hand sales of products, with no
alterations
7. Extending product lifetime
a) Repair: Incentivize/offer repair of sold
products
b) Refurbish: Take-back-scheme and
refurbishment of products, e.g. refurbished
product sales
c) Durability: design for durability, e.g. shift to
high-quality materials
d) Care: Improved / preventive maintenance and
care, e.g., education, maintenance offering
8. Reducing over-production
a) Reduce: “Production on demand” to
optimize production volumes, e.g. instead of
using forecasts

1. Value captured by external players, i.e. not by the company itself

Note: A detailed description of the individual levers including impact area, scope of lever, and key input parameters can be found in the LOOP playbook
McKinsey & Company 10
To quantify the potential circularity impact of products, we first
need to understand the baseline and select the relevant levers

Steps to understand the circularity potential of levers for a product

1 Baseline
Understand the initial material input (net and gross weight) for the
product, and the share of virgin material use.

2 Relevant
levers
Identify relevant levers that can greatly improve the circularity of the
product

3 Quantify
impact
Calculate the impact of identified levers in terms of change in virgin
material use and cost delta using the Circularity Assessment Tool
(LOOP). Can also quantify CO2 impact and other relevant metrics.

McKinsey & Company 11

We can create both a Day 1 hypothesis of lever potential, as well as
detailed customization of assumptions, both supported by LOOP
Our library of material and lever specifications enables rapid sizing of levers for any product category

50

Day 50 (customized, detailed)

Customized analysis based on
1 client specific data, allowing for detailed outputs,
including a detailed Pathway to reach targets
Guided by Playbook with guidance on detailed
Day 1 (outside-in, high-over)
analyses and considerations
Outside-in assumptions, based on
industry average data on e.g., BOM, sales price
and volume, allowing for
hypothetical output for discussion

McKinsey & Company 12

LOOP forms an integral part of strategy setting in typical circularity
journey
2-4 weeks
1. Market view
External landscape &
framing circularity
Create excitement by sharing
best practices
Assess key drivers and long-
term market perspective in
industry
Introduce key circularity
concepts and terminology to
frame circularity
4-6 weeks
2. Strategy
Opportunity sizing &
positioning
Define circularity framework,
measurement logic and
guidelines
Identify and size key levers for
the organization with “LOOP”
tool
Define strategic positioning –
as foundation to move to action
Focus of LOOP
3+ months Continuous
3. Transformation 4. Implementation
Circularity concepts and initiatives along Drive change across
most impactful workstreams the business
A. Recycled material sourcing
B. Circular operations
C. Circular product design
D. Circular business models
E. Repair, care & refurbish services
F. Fully circular offering development Implement initiatives and
continuously track progress
G. Green business building in circular economy and impact
Anchor circularity in the
For prioritized workstreams, derive concrete organization with training
circularity concepts and initiatives programs and change mgmt.
Develop implementation roadmap
McKinsey & Company 13
Agenda

Introduction to the textiles industry

Introduction to LOOP
Archetype Sweater
Real life examples
Appendix

McKinsey & Company 14

An example sweatshirt requires 570 grams of gross, 500 grams of
net material input, of which ~100% is virgin

Material inputs for sweatshirts, g, per average sweatshirts Polyester Cotton Viscose

570 Comments
• Gross weight of material input ~570 grams
500 14% tonnes for a sweatshirts; polyester and cotton as
raw input materials due to their strength and
239 texture
• Average scrap rate from textile to garment to be
210 ~14%; a lot lower than AI archetypes (e.g., Steel
~50%) as manufacturing practices are already
highly optimized

Baseline
• Price: €35/unit, Product Cost: €28/unit, Material
302 100% virgin
265 cost: €2/unit, Max. use cycle: 277.5 wears,
material average utilization 40%
assumed • Volume: 1,000,000 units
• Baseline emission: 13kgCO2/unit
29 25
Gross weight Net weight
1.Plastics: PP, PE, PA6, PU, PET, PC, PVC, ABS, PBT, PEG
2.Other: BR, SBR, NR, EPDM, Glass, Zinc, Copper, Brass, Electronics
3.Source: McKinsey automotive experts
McKinsey & Company 15
Source: McKinsey Analysis
For textiles, 14 relevant circularity levers are selected for quantification
I. Materials recirculation II. Materials efficiency III. Circular business models
Virgin materials Total materials Product Virgin materials

Total materials Product Useful service Useful service

1. Recycling materials
a) Source recyclates: Replace virgin materials
with recycled materials with the same product
specification, e.g. souring recycled steel
b) Recycle closed loop: Closed loop of
production scrap, e.g. steel, aluminium
c) Recycle allowance: Product design to
allow for increased use of recycled
materials, e.g. adjust specifications to allow
for more use of recycled PET
2. Remanufacturing of components
a) Remanufacture internal: reuse of
components in new products
b) Remanufacture external: Sourcing of
reused components externally, e.g. rebars
for new buildings
3. Optimizing for recirculation
a) Design for recyclability, e.g. avoid mixing
different plastic types together, modular
design1
b) End of Life take-back, e.g., investment into
EoL collection logistics
4. Reducing and valorising waste
a) Reduce waste: Reduction of net process
scrap, e.g. by 3D printing or better stamping
processes
b) Valorise waste: External valorisation of
process scrap, e.g. selling process scrap for
recycling instead of putting it on landfill1
5. Optimizing design & specifications
a) Redesign product: New product design
(with or without change in production
methods) to allow for lightweight, e.g. shift
shape of packaging, prefabrication of
building structures etc.
b) Rethink value proposition: Variation in
size to match different user needs, e.g. not
all cars to carry 5 seats
c) Redesign materials: Use of high-
strength/high-performance materials to
allow for lightweight, e.g. shift to high-
strength steel, reinforce with carbon fibre
6. Increasing utilization
a) Sharing: Sharing business model with
product as a service, e.g. car sharing
White: Included
b) Leasing: Longer-term rental/lease, e.g. Grey: Excluded
subscription model for a laundry machine
c) Reuse: 2nd hand sales of products, with no
alterations
7. Extending product lifetime
a) Repair: Incentivize/offer repair of sold
products
b) Refurbish: Take-back-scheme and
refurbishment of products, e.g. refurbished
product sales
c) Durability: design for durability, e.g. shift to
high-quality materials
d) Care: Improved / preventive maintenance and
care, e.g., education, maintenance offering
8. Reducing over-production
a) Reduce: “Production on demand” to
optimize production volumes, e.g. instead of
using forecasts

1. Value captured by external players, i.e. not by the company itself

Note: A detailed description of the individual levers including impact area, scope of lever, and key input parameters can be found in the LOOP playbook
McKinsey & Company 16
 Material: About a third of circularity levers save cost with saving materials, but for
most it’s a trade off between investment and environmental impact
The Circularity Cost Curve (CCC) for a sweatshirt1
Quantification includes cost and EBIT impact, but not the
potential of green premiums, market share growth, or loyalty

Cost delta / virgin material avoided Societal saving, not

captured by the company
USD/kg Key implications
200 193.0
Cost saving
 Circular business models Reuse,
66.5 Reduction of overproduction and Care
have a potential to reduce cost while
50
saving virgin material cost
8a 7d 6c 4a 4b 1a 1b 5a 7a 7c 32.0
 Material recirculation levers 1a and 1b
7.8 11.2
have biggest virgin material saving
0.1 0.1 2.1 impact as textile products allow high
0
-0.7 3a 3b 6b 6a share of recyclants without degrading
-8.9 -8.1 -2.9
product quality
Virgin material  Durability, Care, Redesign levers imply
avoided, kg
-50
trade-off between environmental impact
-46.1
and financials, mostly due to increase of
I. Material Recirculation II. Materials Efficiency III. Circular Business Models cost (COGS and R&D)
1a Source recyclates 4a Reduce waste 6a Sharing 7c Durability  Design for recyclability (enabler) and
1b Recycle closed loop 4b Valorize waste2 EOL take back impact likely only impact
6b Leasing 7d Care
a small share of products that can
3a Design for recyclability2 5a Redesign product 6c Reuse 8a Reduce over-production actually be captured at EOL
3b EOL take back
7a Repair
1. Looking at use cycles of a product portfolio and not individual product
2. Virgin material saved not captured by company itself, but positive business case caused by selling the waste McKinsey & Company 17
Source: McKinsey Analysis using LOOP
Material: Production has the largest impact on water Virgin material
consumption, with most levers reducing water consumption EOL waste – not used
Illustrative outside-in analysis for a sweatshirt

Virgin material savings on portfolio

Virgin material & waste per product, kg level, mln kg Key insights

Recycling initiative have the

Baseline 0.80 0.80 1.60 0
most impact on virgin
1a Source recyclates 0.61 0.80 1.41 75 material use on both a
product and portfolio level
1b Recycle closed loop 0.40 0.80 1.20 160 (as applied to 100% of the
3a. Design for recyclability3 0.80 0.74 1.54 24 volume), Levers like
Sharing, Repair and
3b EOL take-back3 0.80 0.74 1.54 24 Combining levers can Durability increase the
help improve circularity material use per product,
4a Reduce Waste 0.78 0.78 1.57 11
e.g. through extra repairs,
4b Valorise Waste 0.80 0.73 1.53 27 but due to better utilization
of these product they reduce
5a Redesign Product 0.76 0.76 1.52 32 the need for the same sales
volume as in the baseline
6a Sharing1 0.85 0.85 1.70 28
and reduce virgin material
6b Leasing 1 0.80 0.80 1.60 20 over the full product portfolio

6c Reuse 2 0.80 0.80 1.60 5 EOL levers, 3a, 3b, don’t

reduce virgin material input,
7a Repair 0.82 0.82 1.65 40 but reduce waste generated
at end of life.
7c Durability 0.88 0.88 1.76 53
Reducing overproduction
7d Care 0.80 0.80 1.60 74 (8a) has a large impact
8a Reduce over-production 0.68 0.68 1.37 91 across the value chain

1. applied to 5% of initial portfolio for water change in portfolio calculation

2. applied to 10% of initial portfolio for water change in portfolio calculation
McKinsey & Company 18
3. Lever 3, EOL design and take back, virgin material is calculated as ‘ savings due to take back ‘ in a product’s 2 nd life
Water: Production has the largest impact on water Production
consumption, with most levers reducing water consumption Consumption
Illustrative outside-in analysis for a sweatshirt

Water consumption per product, litre Water change in portfolio, bn litres Key insights

Most levers have a positive

Baseline 1,771 132 1,903 0 Combining levers can impact on water consumption
help improve circularity due to e.g., incorporating
1a Source recyclates 1,768 132 1,900 -1
recycled material inputs (e.g.,
1b Recycle closed loop 924 132 1,056 -474 1b recycle closed loop),
improved care in the use phase
3a. Design for recyclability 1,771 132 1,903 (e.g. 7d Care), or by reducing
the amount of products needed
3b EOL take-back 1,771 132 1,903 although individual product
consumption goes up (e.g. 6b
4a Reduce Waste 1,740 132 1,872 -17
Leasing)
4b Valorise Waste 1,771 132 1,903 6a Sharing increases the water
use per product more than it
5a Redesign Product 1,682 132 1,814 -50
saves in the number of
6a Sharing1 1,771 596 2,367 123 products needed, due to the
increased need for washing
6b Leasing 1 1,771 357 2,128 -3 after each (short term) rental

6c Reuse 2 1,592 143 1,735 -107 The difference between 1a and

1b can be explained due to the
7a Repair 1,826 146 1,972 -62 assumption that 1b includes
cotton recycling, which is a
7c Durability 1,948 159 2,107 -83 water intensive textile
7d Care 1,765 90 1,855 -145

8a Reduce over-production 1,771 154 1,925 -142

1. applied to 5% of initial portfolio for water change in portfolio calculation McKinsey & Company 19
2. applied to 10% of initial portfolio for water change in portfolio calculation
 Circularity score: LOOP can help identify initiatives with both a positive business
and a circularity impact, driven by circular flow and utilization score
Illustrative output for a sweatshirt

Size of the circles represents Material Circularity Indicator (small = low, large = high) 3
Profit margin increase compared to baseline
Baseline Materials efficiency
Material recirculation Circular business models
Profit margin decrease compared to baseline

MCI1
Levers Profit margin change
0.60
6c
1a: Source recyclates
0.55
1b: Recycle closed loop
0.50 6b
3a: Design for disassembly
0.45
3b: EOL takeback
Improved circularity

0.40 6a
4a: Reduce waste
0.35
1b 4b: Valorise waste
0.30
5a: Redesign product
0.25
6a: Sharing
1a
0.20 8a 7d
7a 6b: Leasing
7c
0.15 5a 4b 6c: Reuse
4a
0.10 3a/3b Baseline
7a: Repair
0.05
7c: Durability
0
-0.25 -0.20 -0.15 -0.10 -0.05 0 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 7d: Care
Change in profit margin, % 8a: Reduce over-production
1. deep-dive on MCI available in back-up

Source: McKinsey analysis using LOOP McKinsey & Company 20

Deep-dive: levers impact profit and circularity score differently
∆ in profit per
product to
improve MCI
Circular Utilization
Lever name score by 0.1, EUR ∆ profit % ∆ MCI Profit % MCI % flow score
Baseline 15.4% 0.1 0 0.10

I. Materials 1a Source recyclates1 0.1 0.0% 0.106 15.3% 0.206 0.12 0.10
recirculation 1b Recycle closed loop1 0.1 0.0% 0.225 15.4% 0.325 0.25 0.10
3a Design for disassembly -4.0 -3.9% 0.034 11.5% 0.134 0.04 0.10
3b EOL take-back -4.0 -3.9% 0.034 11.5% 0.134 0.04 0.10

II. Materials 4a Reduce Waste 0.2 0.1% 0.016 15.4% 0.116 0.00 0.12
efficiency 4b Valorise Waste 0.1 0.1% 0.039 15.5% 0.139 0.04 0.10
5a Redesign Product -0.1 -0.2% 0.045 15.2% 0.145 0 0.15

III. Circular 6a Sharing -2.4 -23.5% 0.300 -8.1% 0.400 0 0.40

business 6b Leasing -1.9 -16.6% 0.400 -1.3% 0.500 0 0.50
models
6c Reuse 1.5 13.2% 0.467 28.6% 0.567 0 0.57
7a Repair 1.4 0.4% 0.088 15.7% 0.188 0 0.19
7c Durability -2.1 -4.5% 0.075 10.9% 0.175 0 0.18
7d Care -0.1 0.0% 0.102 15.3% 0.202 0 0.20
8a Reduce over-production -0.4 -1.6% 0.129 13.8% 0.229 0 0.23

1. Depending on material still hard to determine purchasing price of recycled inputs, the costs are based on material production prices
McKinsey & Company 21
Source: McKinsey analysis using LOOP
Agenda

Introduction to the textiles industry

Introduction to LOOP
Archetype Sweater
Real life examples
Appendix

McKinsey & Company 22

Leading Fashion & Textile players have started circularity
initiatives
Industry examples following

I. Materials recirculation II. Materials efficiency III. Circular business models

Virgin materials Total materials Product Virgin materials

Total materials Product Useful service Useful service

1. Recycling materials
a) Source recyclates: Replace virgin materials
with recycled materials with the same product
specification, e.g. souring recycled steel
b) Recycle closed loop: Closed loop of
production scrap, e.g. steel, aluminium
c) Recycle allowance: Product design to
allow for increased use of recycled
materials, e.g. specifications to allow for
more recycled PET
2. Remanufacturing of components
a) Remanufacture internal: reuse of components
in new products, e.g. electronic devices
b) Remanufacture external: Sourcing of reused
components externally, e.g. rebars for new
buildings
3. Optimizing for recirculation
a) Design for recyclability, e.g. modular
design, avoid mixing different plastic types
together1
b) Increase EOL take back, e.g., investment
into EoL collection logistics
4. Reducing and valorising waste
a) Reduce waste: Reduction of net process
scrap, e.g. by 3D printing or better stamping
processes
b) Valorise waste: External valorisation of
process scrap, e.g. selling process scrap for
recycling instead of putting it on landfill1
5. Optimizing design & specifications
a) Redesign product: New product design
(with our without change in production
methods) to allow for lightweight, e.g. shift
shape of packaging, prefabrication of
building structures etc.
b) Rethink value proposition: Variation in size
to match different user needs, e.g. not all
cars to carry 5 seats
c) Redesign materials: Use of high-
strength/high-performance materials to
allow for lightweight, e.g. shift to high-
strength steel, reinforce with carbon fibre
6. Increasing utilization
a) Sharing: Sharing business model with
product as a service, e.g. car sharing
b) Leasing: Longer-term rental/lease, e.g.
subscription model for a laundry machine
c) Reuse: 2nd hand sales of products, with no
alterations
7. Extending product lifetime
a) Repair: Incentivize/offer repair of sold
products
b) Refurbish: Take-back-scheme and
refurbishment of products, e.g. refurbished
product sales
c) Durability: design for durability, e.g. shift to
high-quality materials
d) Care: Improved / preventive maintenance and
care, e.g., education, maintenance offering
8. Reducing over-production
a) Reduce: “Production on demand” to
optimize production volumes, e.g. instead of
using forecasts

1. Value captured by external players, i.e. not by the company itself McKinsey & Company 23
Note: A detailed description of the individual levers including impact area, scope of lever, and key input parameters can be found in the CAT playbook
 6B. Leasing

ON RUNNING SHOE
The running shoe you will never own

1a/b. Recycle open/closed

3a Design for recyclability 6b. Leasing
loop

1a/b. Recycle open/closed

loop

The ‘Cyclon’ running  Shoes as a service

shoe is a zero-waste
subscription service.
A shoe made only with
two composites, mainly
extracted from castor
beans.
 Delivery and take back logistics
 One shoe; one recycling process
 100% recyclable
 ISPO Product of the Year + The
Sustainability Achievement.

10,000 Only 2000 subscribers per warehouse

to reach break-even

pairs of shoes by
subscription delivered in June
2022 alone.
McKinsey & Company 24
 6C. Reuse

Optoro
“BlinQ” solution for retailers to resell

4b. Valorize waste 6c. Reuse

 Software to support retailers

and manufacturers resell
unsold & over produced items
easily
 Provide multiple options
— Blinq: e.g., Website to re-
sell the goods
— Re-routing items for
donation, store shelves,
Amazon or eBay

~60%
Carbon emission reduction
~70%
Reduced landfill waste from
enabled return

McKinsey & Company 25

PATAGONIA
Aims to manufacture, repair and recycle products in
order that they last a lifetime
1a/b. Recycle open/closed
6b. Leasing 6c. Reuse
loop

7a. Repair 7c. Durability 8a. Reduce (demand)

 Reusing materials in new ways

 Trade-ins for Patagonia credit
 Offering repairs to extend garment
lifetime & guarantee
 Undertakes activist work: Land
preservation advocacy, boycotts, and
political lawsuits

85%
recycled
>5,6K t
of CO₂e reduction
polyester

McKinsey & Company 26

THE NORTH FACE
Starting into circular e-commerce

1a/b. Recycle open/closed

3a. Design for recyclability
loop

6c. Reuse 7a. Repair

The North face is  Recycle & renew program

predominantly  Circular e-commerce platform for re-
sell, repair & recycle clothing
focusing on
 Clothing lines with 100% recycled
recycling programs materials
 Single-fiber construction and trim for
easy disassembly & recycling into
new garments

Other sustainable actions held by the company:

 Working to eliminate single-  Claiming that 80 percent of The
use plastic packaging by North Face’s synthetic apparel
2025 fabrics will be recycled

McKinsey & Company 27

PUMA
Providing sustainable and reused materials & products

1a/b. Recycle open/closed

3a. Design for recyclability
loop

PUMA tackles  Biodegradable program in 2022

sustainability  >99% better, organic or recycled
cotton
issues induced by
 >88% recycled paper & cardboard
cotton, leather and
 43% recycled polyester across all
polyester product categories (75% by 2025)

Other sustainable actions held by the company:

 Partnered with Indian NGO Goonj to encourage consumers to return
their old apparel and footwear

McKinsey & Company 28

NIKE
Extending the lifespan of shoes

1a/b. Recycle open/closed

3a. Design for recyclability
loop

4a. Reduce waste 5a. Redesign product

Creating products that  “Slice-and-grind” technique to make

recycling easier
can be disassembled
 Eliminated footwear manufacturing
and easily reused waste from landfills or incineration
while keeping quality  Created a workbook to engage with
& performance as designers on circularity
priority

55%
of its manufacturing scrap was
750,000
pounds of rubber waste Nike
recycled across products recycled in 2021

Source: company website, press research McKinsey & Company 29

YUMA LABS
Circular closed material loop for sunglasses

1a/b. Recycle open/closed

4a. Reduce waste
loop

Yuma produces  Simple process for customers

to return used sunglasses
sustainable sunglasses
 Low-effort and postage-paid
and brings some of the
 Creating new ways to
biggest names in street eliminate waste from the
fashion into its mission of landfill
closed-loop production

“Close Your Loop” service

 Tracking origination and
manufacturing process of the product
with product code
 Information related to EoL treatment
and recycling methodology

Source: company website, press research McKinsey & Company 30

DyeCoo
Providing novel textile processing solution

Other: Water and chemical

4a. Reduce waste
saving

DyeCoo’s CO₂ technology  Zero water approach

is the world’s first 100%  Zero chemicals necessary
water-free and process  Lower energy consuming
batch cycles
chemical-free textile
 Larger production volumes
processing solution with lower costs

Current exemplary reference project:

“By helping scale the DyeCoo system for use with larger
production volumes, we could help to make a big difference
for the environment as well as workers and communities
around textile facilities,” – Chief Sustainability Officer of
IKEA

Source: company website, press research McKinsey & Company 31

Kering
Leading transition to circular manufacturing amongst
luxury fashion brands
1a/b. Recycle open/closed
1c. Recycle allowance 3a. Design for recyclability
loop

6c. Reuse 7c. Durability

 Design sustainable luxury products with higher recyclability and durability

 Invest in second hand luxury platform and biodiversity conservation fund

Efforts to lead the industry and supply chains

“Clean by Design” program to 10,000+ raw materials’ database

support textile supply chain’s shared opensource/API (Emissions,
resource saving resource consumptions)

Source: company website, press research McKinsey & Company 32

Tommy For Life
Increase use of products

1b. Recycle closed loop 3a. Design for recyclability

6c. Reuse 7a. Repair

 Consumers are invited to trade in their Tommy Hilfiger garments in stores or

send them via mail. In partnership with a third party, Tommy Hilfiger then
sorts, cleans and repairs all items.
 Items will be reinvented into unique styles as part of the Remixed collection or
recycled into yarns, repurposed or donated.

100,000 kg
Textile from landfill saved since 2020

Source: company website, press research McKinsey & Company 33

H&M Group
Increase use of products

1a/b. Recycle open/closed

1c. Recycle allowance 3a. Design for recyclability
loop

6c. Reuse 7a. Repair

 Circular products- materials and that can be repaired, reused and remade
multiple times
 Circular supply chains - support circular production processes
 Circular customer journeys – make it easy to repair, reuse and recycle
garments

M.IN.T CARE
 Platform providing repair, mending,
washing services and DIY tips
 Inspiring and educating users to make
fashion last longer

Source: company website, press research McKinsey & Company 34

Beyond physical products
Producing one digital product vs one physical product eliminates material
waste and reduces greenhouse gas emissions by 97% while, on
average, using 3,300 fewer litres of water.

DRESSX
 Using 3D software to build a true-to-life garment that can
be visualised and simulated to look like real clothing. 9%
of clothing is bought for content creation to be returned
afterwards.
 Products:
— ‘Influencer marketing campaign’ packages for brands
to give their influencers digital clothes
— Real-time videos and photos for marketing or social
media

DRESSX prevents the production of items that might only

be worn once or twice, it decouples financial growth from the
extraction of raw materials

Source: company website, press research McKinsey & Company 35

Agenda

Introduction to the textiles industry

Introduction to LOOP
Archetype Sweater
Real life examples
Appendix

McKinsey & Company 36

Key assumptions for textile archetype
Sweatshirts circularity assumptions

 Price: €35/unit, Product Cost: €28/unit, Material cost: €2/unit, Max. use cycle: 277.5 wears, average utilization 40%
 Volume: 560000000 units
Baseline  Baseline emission: 13kgCO2/unit
 Product composition: 50% cotton, 40% polyester, 10% viscose

1a 6b
Volume: 5% of products sold / Utilization ▲ 65% (25%point)
Open loop recycling rate: 50% Viscose, 50% polyester Monthly subscription fee €30/month (= 10 units
1b Closed Loop recycling rate: 50% Viscos, 50% Volume: 10% of product sold / Max. use cycle ▲ 72% /
polyester, 50% cotton 6c
Utilization ▲ 80% (32%point) / Change in price ▼ 40%
3a Waste recirculation rate ▲ 20% / Stake 100%
3b Additional R&D cost ▲ 5% 7a Repair incident rate ▲ 20% / Fee €7, Cost €1
Material weight ▲ 10% / Max. use cycle ▲ 20%
7c
4a Scrap rate ▼ 2% R&D Cost: 5% of original cost / Repair incident rate ▼ 10%
4b Waste recirculation rate ▲ 20% / Stake 100% 7d Wash frequency ▼ every 5 wears instead of 3 (Max. use cycle ▲ 14%)

5a Cost ▲ 1% / Weight ▼ 5% / No use cycle extension 8a Over production rate ▼ 50% (20%point) / Per unit cost▲ 2% (Indirect cost)

Volume: 5% of products sold / Utilization ▲ 70%

6a
(30%point) / Rental fee € 4/#

1. For cotton material only close loop recycling levers apply.

2. Levers 3a and 3b modeled with same parameters, but can be changed McKinsey & Company 37
Appendix: Material Circularity index (MCI)
Linear Flow Index (LFI) Utility Factor
Indicator for how linear (1) or Factor to account for additional design
circular (0) a product is considerations that improve product
Circular flow = 1-LFI weight/utilization/lifetime

Scaling Factor (0.9)

𝑉𝑖𝑟𝑔𝑖𝑛 𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙 + 𝑈𝑛𝑢𝑠𝑎𝑏𝑙𝑒 𝑊𝑎𝑠𝑡𝑒
𝑀𝐶𝐼 = 1 −
2 ∗ 𝑃𝑟𝑜𝑑𝑢𝑐𝑡 𝑊𝑒𝑖𝑔ℎ𝑡
In order to reflect potential differences in quality
0.9 (e.g., shorter lifespan) between two fully linear
∗ products (LFI=1) the average product is scaled to
𝑊𝑎𝑣𝑔 𝑈 𝐿
∗ ∗ have a score of 0.1 such that any worse-than-
𝑊 𝑈𝑎𝑣𝑔 𝐿𝑎𝑣𝑔 average product will have a score 0<x<0.1

Product Weight Utilization & Lifetime

Since lower than average Since higher than average
weight should result in a utilization and lifetime should
factor >1, the average is result in factor >1, the average
in the numerator is in the denominator

Source, Ellen MacArthur Foundation, Granta Design (2015) Circularity indicators: an approach to measuring circularity project overview McKinsey & Company 38