Circular Economies and Closed Loop Manufacturing Models

Introduction

Since 2000, fast fashion has increasingly taken over the apparel industry—Data indicates consumers are purchasing twice as much product and keeping their garments for only half as long compared to previous decades. Fast fashion operates on a linear model of ‘take-make-waste’ where raw materials are extracted; garments are produced rapidly, purchased, and then disposed of shortly after. The industry responds to rapidly emerging trends that encourage quick production, leading to unethical production practices, causing harm to the environment.

The global sourcing supply chain is complex and requires a lot of planning ahead for seasonal apparel and predicted trends. Premeditation of trends and production can often lead to overproduction if errors occur in forecasting, supply chain issues, or sales results lower than anticipated, resulting in excess inventory transported to landfills. According to the UN Environment Programme, 92 million tons of textile waste are produced each year globally and end up in landfills and low-income countries, where there is a lack of waste-management infrastructure, leading to severe environmental and social consequences (UNEP, 2025).

Background

A circular economy and closed-loop manufacturing are systems where materials never become waste and instead are kept in circulation  by methods of maintenance, recycling, remanufacturing, reusing, upcycling, and composting. A circular economy eliminates waste and pollution, circulates products and materials, and helps regenerate nature, ultimately better for business, people, and the planet (Ellen MacArthur Foundation, 2024a, p.1).  A closed-loop manufacturing system produces zero waste by recycling and reusing all materials. An open-loop recycling process  recycles the material but is not used in the same product; rather, they are used in a different product that mirrors the same components. A closed-loop manufacturing system reduces the need for sourcing of raw materials by instead using recycled materials to create the same garment (Akram et al., 2026).

Trend Analysis

The trend of a circular model is increasingly gaining traction due to multiple factors. One is the growing focus on sustainability and environmental impact, including climate change and the amount of textile waste. Consumers are focusing more on the sustainability of brands, driving the industry to adopt more sustainable practices and transparency. Lastly, governments are beginning to grasp and enforce the idea of a circular economy. An article from Sage Publications illustrates how the European Union has begun developing and implementing sustainable practices into business operations across the EU, including footwear, textiles, electronics, and bio-based packaging (Ellen MacArthur Foundation, 2024b; Veleva, 2025).

The current linear production model of fast fashion has proven unsustainable and requires a transition toward more sustainable efforts for people and the planet, with the goal of closed-loop manufacturing and a circular economy. As many companies implement these systems, focus will shift toward resource efficiency, supply chain transparency, and reducing raw material waste to improve the environmental impact.

Many companies are choosing to be more sustainable to improve their image and meet customer expectations.  Closed-loop manufacturing works by collecting used products, sorting them, and then recycling or remaking them into new items so nothing goes to waste. One example of this is fiber regeneration, where old clothes are broken down and turned into new fibers to create new fabric. However, a major challenge is that many clothes are made from mixed materials, which are hard to separate, making them difficult to fully recycle. This shows that while the system can be helpful, challenges remain.

Examples of Circular Economies and Closed-Loop Manufacturing in Apparel

Circular economy practices in the apparel industry are most demonstrated through brand initiatives that integrate several key components of closed-loop manufacturing. One of the most common and widely adopted circularity practices is repair, reuse, and resale programs. These models focus on reducing overconsumption by extending a product’s life cycle through alterations, mending, and material reuse. Coach is a strong example of a brand with an increasingly circular model. In 2023, Coach launched Coachtopia, a sub-brand offering “Upcrafted” leather bags and accessories made from leftover production scraps. This builds on Coach (Re)Loved, a 2021 initiative focused on refurbishing, reimagining, and recycling pre-owned and damaged products. (Zarzosa, 2024).

Garment collection and take-back programs, though similar in purpose, focus on end-of-life disposal and textile recovery. Brands such as H&M and UNIQLO use in-store bins and drop-off points to collect used textiles. Many also offer discounts or coupons to encourage participation in these programs  (Burns, 2018). Collected garments can then be reintegrated into production through recycling initiatives. Patagonia is a leading example, using recycled materials since 2005 (Patagonia, Inc., 2005). A 2025 report stated that over 84% of Patagonia products are made from recycled materials. (Clancy, 2025).

Brands are also implementing circular strategies earlier in the supply chain through resource efficiency initiatives. Levi’s introduced Water<Less manufacturing techniques in 2011 to significantly reduce water use in denim production. By 2019, 69% of Levi’s bottoms were produced using Water<Less methods, and the company has shared these practices with other brands to support industry-wide conservation (Levi Strauss & Co., 2018). Climeworks has developed direct air capture technology that removes CO₂ from the atmosphere, permanently offsetting emissions from apparel production (Climeworks, 2026).  While these innovations demonstrate progress, several challenges make it difficult for more companies to implement the same practices.

Implications for Sourcing Professionals

Global supply chains are changing the way they think because of circular economy and closed-loop manufacturing models. There has been a shift in the industry to not just focus on minimizing cost but to prioritize value long term, resource efficiency, and sustainability (Ly, 2021). Professionals need to consider the full life cycle of a product, specifically what happens to it afterward. They also need to focus on being transparent to ensure that their practices are responsible (Shaharudin et al., 2025). Another changing factor is supplier relationships. Companies want to focus more on long-term partnerships with vendors and suppliers that prioritize sustainability and circular models (Blomsma et al., 2019).

Furthermore, supply structure and logistics are affected by circular models. Many companies are implementing nearshoring and regional supply chains to support local recycling and to reduce transportation emissions (Blomsma et al., 2019). Companies are also utilizing reverse logistics, like overseeing product returns and recycling flows, as a vital part of sourcing strategies. Since products are now a part of a continuous life cycle, these shifts influence inventory management too. Overall, it is evident that future sourcing teams will have to balance sustainability, cost, and advancements in the industry when adapting to circular economy and closed-loop manufacturing models.

Conclusion

Fast fashion has led to people buying more clothes and discarding them faster than before, creating a substantial amount of waste. The fashion industry has led to overproduction and excess inventory ending up in landfills due to its model of take, make, and dispose, along with complex sourcing and trend forecasting. A circular economy offers a better approach by keeping materials in use through recycling, reuse, and repair. Closed-loop systems go further by turning old products into new ones, reducing the need for new raw materials and cutting down waste. This makes sourcing more efficient and less harmful to the environment.

In the long term, circular practices are set to transform the apparel industry. Growing consumer demand for sustainability and increasing government pressure are pushing brands to rethink how they design, source, and manage products. Even though there are challenges, the shift toward circular models will lead to more sustainable, efficient, and responsible sourcing in the future.

There are challenges that come as a result of the circular economy. One such challenge is that products are often misclassified as waste. This can cause delays, import bans, and compliance uncertainty due to a lack of harmonized standards. This affects developing countries, in which large volumes of used goods can strain local industries and waste systems. (Bato & Kašťáková, 2025). Another challenge with a circular economy is infrastructure limitations. While technological advancements occur every day, they are still in their early stages. These advancements need further development to become cost-effective and widely adopted. Despite some of these challenges, the shift towards a circular economy is inevitable.

Given the impact of the circular economy on emissions, environmental regulations should mandate a minimum recycling rate and set standards for recycling rates, waste reduction, and the use of recycled materials in manufacturing processes (Dordrecht, 2025). These increasing regulations will promote a circular economy within our supply chain. Furthermore, consumers are demanding more to be done by product and service suppliers to ensure sustainability. This is sparking further research and academic interest in understanding how many organizations position themselves towards sustainability. Apparel companies have also committed to ESG goals; one example is H&M. In 2023, H&M spent SEK 2.1B ($195M USD) on recycled and sustainably sourced materials. These efforts reduced its greenhouse gas emissions by 24% and its value chain emissions by 22%. (Hamburg, 2025)

Many forms of circular technology are in the growth or maturity stage. Some of these technologies include circular chemical processing and waste treatment in the growth stages and energy storage and electrical systems in the maturity stage. As these technologies are growing, this accelerates the number of companies wanting to invest. With these factors pointing towards the supply chain striving for a circular economy, apparel companies will be looking at a sustainable future.