In the fashion industry, the adoption of sustainable, ethical, and circular ways of working and selling has significantly increased over the past decade. Consumers are becoming more aware of responsible garment production, recycling, repairability, and reusability, but it remains uncertain how fast this trend will be adopted. What is clear, however, is that governments, regulations and the overall environmental situation are steering society in this direction.
While this progress is promising, more work is needed from businesses, regulators, and consumers to achieve full circularity. This blog discusses the latest trends in circularity, upcoming solutions, and how brands and retailers can transition to a more circular model while becoming profitable by embracing new ways of working. We’ve gathered expert insights on how to tackle these trends in practice, outlining actionable steps to start with—available in a format that suits your preference: read, watch, or listen.
- Regulations reshaping the fashion industry
- Rise of innovative business models
- Optimizing processes with data
- Lowering the threshold to innovation
Regulations reshaping the fashion industry
The European Parliament is advancing plans for a digital product passport (DPP) for textiles as part of the European Green Deal and Circular Economy Action Plan. This legislation tackles the fashion industry’s environmental footprint and the need for transparency throughout the supply chain. An updated draft report was published on March 14th, 2024, aiming to start tracking garments by 2027 and achieve a full circular DPP by 2033.
Details of the three-phase deployment are as follows:
- Phase 1 - deployment of a “minimal & simplified DPP” for textiles at a short-term horizon of 2027
- Phase 2 - deployment of an “advanced DPP” for textiles at a mid-term horizon of 2030
- Phase 3 - deployment of a “full circular DPP” for textiles at a long-term horizon of 2033
Focusing on phase 1, the main recommendations from the European Parliament are as follows:
- A simple and user-friendly system to display environmental labelling information to consumers should be implemented and standardized
- The adoption of the DPP can be adjusted according to the size of companies by using four proposed variables—granularity, level of detail, reliability, and completeness—to tailor the complexity and effort required for reporting mandatory information
- Stakeholders such as distributors, aftersales services, auditors, and recycling companies should prepare to collect additional information. Interoperability between different information systems and tracking methods (e.g., QR codes, barcodes, RFID) should be encouraged to facilitate data exchange
- Extending and applying DPPs at the national or European level to foreign products designed and manufactured outside Europe should be encouraged to protect the European textile sector against fast fashion
To make sure you are ready to meet the DPP in phase 1 of the proposed timeline, you must develop methods to collect, analyze, and store DPP data. As we consider these requirements, it's clear they center around becoming more sustainable, introducing new business models, and building stronger collaborations with your suppliers and distributors. To meet these new demands, you'll need modern technologies. The good news is that you don't have to implement a complete overhaul to comply with the first wave of regulations—much of the required data already exists in your ERP and PLM systems, albeit scattered across various locations.
The real challenge is organizing this information and aligning it effectively. In our recent podcast (on circularity, new regulations, agility, and data in the fashion industry), Espen Enger, Business Line Director at Columbus Norway, highlights this issue: “A lot of the data businesses need to implement DPP is already in their existing IT architecture. But they need to analyze the data and prepare for this, understanding what kind of information they need and where to locate it in their applications.”
You can watch the full podcast episode below.
Audio version:
New regulations dictate that businesses must adopt the DPP as part of the implementation of the EU Green Deal. Most of those businesses are seeing that requirement not as a tax, but as an opportunity to create strategic benefits and financial returns.
The Kezzler Connected Products Platform is in use by many brands as their strategic digital ID solution, delivering DPP, digital product experiences, and value change traceability. In partnership with GS1, a global non-profit dedicated to standards for unique product identification, Kezzler has delivered the best-in-class implementation of two GS1 standards - EPCIS 2.0 for traceability, and Digital Link for digital product experiences. This collaboration aims to enhance the identification, capture, and sharing of critical data about products, locations, assets, and more.
Additionally, the ProPare project was conducted in collaboration with Axfoundation, Swedish Trade, Environmental Labeling Sweden, GS1, trading companies, brand owners, and technology developers. Together, they aimed to guide legislators and businesses toward safe product information and accelerate the shift to sustainable production and consumption.
Rise of innovative business models
As society increasingly prioritizes sustainability, new statistics predict that second-hand clothing sales will surpass fast fashion sales in the next decade. This shift has resulted in the emergence of innovative business models, including rental services, repairs, recycling, and sustainable return management.
H&M is one company at the forefront of these changes. They've acquired a majority stake in Sellpy, an online second-hand shop, and have also ventured into selling its items second-hand. Additionally, H&M has introduced a garment recycling program, where customers receive vouchers for each bag of unwanted clothes they return. The company is also exploring the rental space.
Helene Behrenfeldt, Senior Fashion Industry & Solution Strategy Director at Infor, highlights some of these issues: "One client I talked to says that handling returns (for ex at the end of rental period) is complex due to the need for quality check, cleaning and other activities to prepare the product for resell. It may seem straightforward, but it's quite time-consuming. Efficient management of these processes is crucial for maintaining profit margins."
These changing business models necessitate significant transformations in both strategy, processes, change management and people. That means having the right platform in place is essential. A composable, flexible structure enables you to scale up or down and adapt quickly to specific needs, enhancing your agility and helping you to be better prepared for future needs. A composable structure also offers significant flexibility through open system architecture and interfaces (APIs) to other systems. It allows businesses to retain their existing systems during the initial phase and migrate gradually to a more modern architecture. This means you can evaluate new features and adopt at your own pace without making extensive changes in a short run.
Kristoffer Persson, Global Head of Architects at Columbus, contrasts traditional and composable platforms, “Traditional technology platforms offer a basic package where everything is done within one system, but these platforms can be limited and difficult to customize.” He notes that many businesses feel constrained by their current solutions, fearing lengthy and costly transformation projects with uncertain outcomes. “When I speak with customers, I'm able to show them that effective solutions are available without requiring lengthy transformation projects,” he says.
Kappahl has recently transformed its business to align with new circular models, adapting to evolving EU regulations and changing consumer demands. The retailer is embracing the secondhand market, aiming for 50% of its assortment to be enabled for circular offers by 2026. By providing full traceability from fiber to garment and focusing on high-quality, timeless designs that ensure long product lifespans, Kappahl demonstrates its commitment to sustainability and a proactive stance on upcoming regulatory changes.
Kappahl is also utilizing transparency tools like the Higg Index and TrusTrace to gain comprehensive visibility across its supply chain. These tools offer valuable insights into environmental and social performance, allowing the company to measure, improve, and effectively communicate its sustainability efforts.
Additionally, the shift towards large-scale circular business models positions Kappahl to stay ahead of legal requirements, such as the DPP. By integrating advanced traceability systems, Kappahl can provide detailed information on a product's composition, origins, and environmental impact as mandated by the DPP, ensuring alignment with the fashion industry’s push towards sustainability.
AI serves as a valuable tool for driving new business models and optimizing existing processes. Henrik Leffler highlights two practical AI use cases in fashion:
- AI for modernizing legacy systems: "Generative AI is a powerful asset for companies looking to modernize outdated technology platforms," says Henrik. "For businesses with legacy systems, the modernization process can be time-consuming and complex. AI can streamline this process by quickly analyzing large volumes of documentation, reviewing old code, and identifying opportunities for updates. This results in faster and more efficient upgrades, allowing companies to optimize their operations without the usual lengthy downtime"
- AI for quality control in garments: "Another significant application of AI is automating product quality assessment," Henrik explains. "For example, AI can inspect garments like T-shirts for color degradation, fabric damage, and other imperfections. By utilizing a camera and AI algorithms, businesses can instantly evaluate the condition of items on the production line or in a warehouse. This level of precision enhances quality control processes and minimizes the risk of defective products reaching consumers"
However, before jumping on the AI bandwagon, Henrik emphasizes the importance of focusing on use cases that provide tangible value for your organization. Too often, companies fail to identify AI use cases that benefit their business and will be adopted by end-users. At Columbus, we've developed a structured framework to help businesses select and implement AI use cases that align with their strategic goals. This ensures AI is applied effectively, delivering outcomes that are truly impactful. Interested? Find out more by clicking here.
People also play a crucial role in adopting modern technologies. Implementing new systems requires a cultural shift, starting with organizational leadership and change management. Changing processes and mindsets can be challenging, especially when employees are comfortable with the current way of working or fear the unknown.
By forming a cross-functional team before initiating any changes, you can gather a range of feedback from various parts of the organization, helping you see a broader perspective. Those most vocal about the change often have valuable insights that can contribute to a robust change plan. It's important to align mindsets, highlight the business benefits of the changes, and clearly explain how success will be measured. This is what change management is about in a nutshell. Using simple language to share the benefits of the changes will encourage everyone to take ownership and support the project. You can download our roadmap with tips on effectively managing change here.
These new business models are also going to influence your partnerships and ecosystem, promoting greater collaboration and integration needs. As the focus shifts toward sustainability, the need for reliable, high-quality suppliers becomes more critical, potentially reducing the number of suppliers and emphasizing those who offer the highest value.
According to Henrik Leffler, Digital Transformation Lead at Columbus, "We'll see more ecosystems forming around companies. Ecosystems will emerge in B2B, business-to-consumer, and production sectors, where forward-thinking companies that integrate data across their ecosystems will gain a significant competitive advantage."
Espen Enger, Business Line Director at Columbus Norway, highlights the potential for innovative collaborations, "There are numerous opportunities for new partnerships, including with repair and cleaning experts. These value-added services—whether through renting, repairing, or cleaning—shift the focus from the product itself to a more holistic approach that includes surrounding services."
Optimizing processes with data
As your business embraces new models and technologies, you're likely collecting significant amounts of data daily. It's essential to have a data management strategy in place and to structure this data properly to enhance decision-making, predict trends, manage inventories, and personalize customer experiences. Data is a key component to support all these changes.
Helene Behrenfeldt adds, "From the clients I speak with, many view product lifecycle management (PLM) as a natural starting point for data collection, especially considering this is the place where the product is born. However, the need for data extends beyond PLM to include the extended supply chain. If you're dealing with outsourced production, accessing and managing this data can be challenging."
This is where a structured data setup becomes crucial. A modern technology platform connects all your transactions and activities to a single database, enabling comprehensive reporting. This setup allows you to track products effectively, automate processes, and customize your data reporting.
Solutions such as Infor's CloudSuites are designed for composability from the ground up, offering a suite of applications that work seamlessly together while integrating easily with other best-of-breed applications. This flexibility ensures you can adapt and scale your systems without losing core ERP integrity. Infor's cloud ERP solutions provide several significant advantages for businesses in the fashion industry:
- Industry-specific solutions for fashion: Infor’s CloudSuite provides tailored functionality for the fashion industry, promoting sustainable circular business models that focus on reuse and recycling. It enhances collaboration with partners to reduce waste and build value through durability
- Collaborative supply chain management: Infor’s solutions create a unified connection with the partner network, improving supplier collaboration and optimizing financial transactions with innovative supply chain finance tools
- Accelerated product innovation with PLM for fashion and on-demand apparel: Infor CloudSuite enables fashion businesses to swiftly launch new, customizable products. Its product lifecycle management (PLM) streamlines design to production and supports detailed visualizations, allowing for personalized product offerings
- Enhanced sales efficiency and customer satisfaction: Infor CloudSuite boosts sales efficiency by streamlining processes and improving customer satisfaction, reducing implementation time with pre-built functionalities and easy integration with industry-standard third-party solutions
- Cost-effective multi-tenant cloud solution: Infor’s multi-tenant cloud solution offers continuous updates at a lower cost, with automated updates that minimize downtime. Businesses can preview and implement new features smoothly without major upgrades
For more information on Infor M3 CloudSuites and our experience, click below.
Another focus area is ensuring effective traceability, especially as consumers, regulators, brand owners, and retailers demand more detailed product information. In our recent fashion industry podcast, Helene proposes that the fashion industry could benefit from adopting practices used in the food sector to enhance transparency and sustainability, "If you look at the food industry, you can trace the origin of products like salmon all the way back to where the fish was raised and even what feed it was given. This level of traceability has long been established and regulated in the food industry.”
Espen Enger highlights GS1’s role in collaborating with leading retailers and brands to address traceability challenges. They've developed a new standard called digital link, that can include much more information than a standard QR code. Through this standard, businesses can link their products' unique identities to multiple online sources of detailed, real-time content.
These codes can be scanned by smartphones, potentially transforming how businesses share information and driving a new era of supply chain efficiency, transparency, and enhanced consumer experiences. “This presents a significant opportunity to address these needs, especially for the future,” says Espen. “We'll be able to achieve what's currently impossible with traditional standards.”
Lowering the threshold to innovation
Innovation is crucial for fashion brands and retailers to stay competitive. One effective way to drive innovation without significant upfront costs is by maximizing your current IT infrastructure.
Henrik Leffler, Digital Transformation Lead at Columbus, speaks on how you can leverage existing systems and technologies to integrate new software solutions, improve data analytics capabilities, and automate routine processes. This approach saves resources and paves the way for continuous improvement.
He adds, “I see a lot of companies with cloud or SaaS ERP that don’t fully leverage their capabilities. This leads us to innovation because the more you lower the threshold to enable innovation using low code and ready-made machine learning models, the more you can utilize your tools. I encourage you to explore the tools you already have and think about their potential.”
Fostering a culture of continuous improvement helps identify and implement minor changes that lead to significant advancements, allowing you to adapt to changing consumer preferences and market dynamics swiftly and effectively. Although there's still plenty to do before fashion can adopt to a completely circular model which is profitable for them, steps are being taken in the right direction.
By leveraging advanced analytics and digital tools, businesses can gather and interpret significant amounts of data better to understand consumer behaviour, track environmental impact, and optimize supply chains. Technology enables transparency, allowing brands to share their sustainability efforts with consumers, building trust and engagement.
With advanced technology platforms such as Infor CloudSuite, you can drive both operational excellence and sustainability in the fashion and retail industries. For more information on how we can help your business, feel free to contact a member of our team below.
