2.1. The European Textile and Clothing Industry
The demand for textiles has grown exponentially over the last few decades, which has led to a globally interconnected and complex T&C industry, in which the EU has taken a central role as an importer and end-user [
11]. Rising demand and international competition have accelerated the pace of new fashion collections, and value chains have become more efficient by using low-tech systems and low-cost materials, and by outsourcing production processes to low-wage countries. This has made textile products increasingly affordable, further fueling demand. While value creation within the EU is mainly concentrated in product development, marketing and supply chain management [
12,
13], globally interconnected production processes create wider implications for both humans and the environment, including the intensive use of land and water, greenhouse gas emissions, and air, soil and water pollution [
13]. This has made the T&C industry a key focus of the EU's new Industrial Strategy for Europe and the European Circular Economy Action Plan [
4,
14].
In its “Strategy for Sustainable and Circular Textiles” [
15], the European Commission sets ambitious targets for the T&C industry. For example, by 2030, all textile products on the European market should be durable and recyclable, consist largely of recycled fibres and be manufactured in compliance with environmentally and socially sustainable conditions. In addition, the European textile sector should remain economically competitive, resilient and innovative, while assuming responsibility for its products along the entire value chain, which also includes use and disposal of these products. Within the textile sector, the fashion industry represents the largest sub-sector, being one of the most globalised linear value chains [
16]. The EU strategy for sustainable and circular textiles suggests a range of measures for transforming the existing linear model into a circular one. These measures include mandatory eco-design requirements, preventing the destruction of unsold or returned textiles, tackling microplastics pollution, and extended producer responsibility for reuse and recycling of textile waste.
It is evident that such a transformation requires a fundamental cultural and structural reorientation of the entire linear value chain from product development to manufacturing, use and disposal, through the development of new business models and the use of innovative technologies, involving all relevant internal and external stakeholder groups [
15,
17,
18,
19,
20,
21]. This will inevitably be a complex process, interweaved with other corporate strategic objectives. However, many companies remain uncertain as to how to initiate and implement such a transformation, which is increasingly required by new European laws and standards. The challenge for the industry, which contains many SMEs, is to transition to sustainable and circular business practices, whilst remaining profitable in an increasingly competitive sector.
2.2. Sustainability and the Circular Economy
The most widely used definition of “sustainability” is development "that meets the needs of the present without compromising the ability of future generations to meet their own needs" [
22] (p. 16), where such development is in harmony with the natural environment. In recent years, the concept has also been steadily gaining importance in the corporate context [
23]. Based on the triple bottom line, as put forward by Elkington [
24], the view has prevailed that to be fundamentally sustainable in the long term, an organisation must consider all the contexts in which it operates. This includes the three dimensions of sustainability: social, ecological and economic, often also referred to as people, planet, and profit [
25]. The economic dimension considers the efficient use of tangible and intangible resources to ensure the long-term survival, competitiveness, and resultant benefits to a company; the ecological dimension focuses on the natural environment and concerns the availability, use, and treatment of natural resources; and the social dimension focuses on human well-being, society, inter-societal relations, and fairness. Sustainability is therefore a holistic construct that must be anchored in corporate strategy and the business model, and must be linked to corporate culture, processes and activities [
25,
26,
27]. At the same time, sustainability can best be assessed within the value chain within which an organisation operates, thus encompassing the entire supply network and incorporating upstream and downstream supply chain processes [
28].
In developing their sustainability strategies and policies, many companies referred to the UN Sustainable Development Goals (SDGs), which came into effect in January 2016, and have been described by the United Nations [
29] as the “2030 Agenda for Sustainable Development”, which is designed to “shift the world on to a sustainable and resilient path” (para.1). The European Commission [
30] argued that “the 2030 Agenda integrates in a balanced manner the three dimensions of sustainable development – economic, social and environmental” (para. 6), and in the context of the industrial sector, PricewaterhouseCoopers [
31] commented that with the advent of the SDGs “sustainability is moving from the corporate side-lines into the mainstream” (p. 6). Recent research [
32] found that the three most referenced SDGs in company reports across a range of industry sectors were SDGs 8, 12 and 13 (
Table 1). All the SDGs have associated targets, and for every target, there are one or more “indicators”, there being 241 in all [
33].
Within the wide definition of sustainability, the concept of the CE is increasingly being viewed as a key lever to effect the transition to a more sustainable future. It is of interest and relevance to both academics and practitioners as it offers principles and approaches regarding how companies can implement sustainability [
20,
35]. In its most basic form, “a circular economy can be loosely defined as one which balances economic development with environmental and resource protection” [
36] (p. 373), and the Ellen McArthur Foundation suggest that a CE is “restorative and regenerative by design, and aims to keep products, components, and materials at their highest utility and value at all times” [
37] (p. 46). In similar vein, the CE has been defined by the European Union as an “economy where the value of products, materials and resources is maintained in the economy for as long as possible, and the generation of waste minimized“ [
2] (p. 2). The CE concept encompasses all stages of the product life cycle from product design and production, through marketing and consumption to waste management, re-use and recycling. A lasting transition to a CE will require radical changes in product development and manufacturing but also in consumer buying and consumption practices. The prevention, reuse and recycling of waste materials means that waste management becomes an opportunity to return as much waste as possible back into productive use. Consequently, companies need to extend their focus on the use phase and the end-of-life treatment of their products. This requires new and innovative business models, products and processes that build upon the CE principles - often referred to as R-principles [
35] (
Figure 1) - and which create sustainable value for the company and all stakeholders [
38]. Geissdoerfer et al. [
39,
40] refer to business model innovation as a key tool for implementing CE in organisations.
In today's economy, which is characterised by a global division of labour and outsourcing, a sustainable CE can only be implemented through joint, coordinated strategies and practices within supply chain networks [
41,
42]. As Brown et al. [
43] conclude, well-founded partnerships and functioning collaboration are key success factors for circular oriented innovation. According to Geissdoerfer et al. [
39], network infrastructure and capabilities of the supply chain play a critical role in enabling circular business models and Montag et al. [
44] refer to the holistic integration of circularity into supply chain management as the enabler of circular business models. Montag et al. [
44] present a circular supply chain maturity model, according to which changes are needed at the strategic, tactical and operational levels to move from a linear to a circular supply chain. First, it requires a paradigm shift within an organisation to ensure that the CE principles are incorporated into the long-term strategy and all activities necessary to implement it. At the tactical level, the authors focus on the product and its life cycle, arguing that changes are needed at all stages, from product development to use, disposal and recycling, to make the linear supply chain more circular. At the process level, the authors refer to the Supply Chain Operations Reference (SCOR) model [
45], adapted for circular supply chains, and illustrate that the majority of the eight SCOR processes need to be completely redesigned with the goal of closing the product and material loops.
It is clear here that the first two levels refer to the company and its management. The model suggests that the alignment of an organisation´s strategy, business model, and product/service portfolio towards the CE is a prerequisite for implementing CE principles at the operational level. The company's internal strategic and tactical decisions are thus drivers to implement changes in internal processes and along the supply chain. The redesign of supply chain processes is therefore essential for CE implementation. As a result, the supply chain is the key to achieving circularity at corporate level.
In this context, Montag and Pettau [
46] provide “a theoretical and conceptual approach for measuring supply chain performance in the circular economy era” based on the SCOR model adapted for circular supply chains (CSC). The authors maintain the model “provides a comprehensive composition of indicators to holistically measure the supply chain’s performance from an economic, environmental, social, and circular perspective” (p. 1). The framework (
Figure 2) not only includes the three traditional dimensions of sustainability – economic, environmental and social – but also the new circular perspective of performance “thus reconciling the goals of sustainability and circularity” (p. 2). Their research also distinguished between the environmental and circular perspectives which may have conflicting goals. “While the CE aims for keeping products, components and materials in circulation for as long as possible and with highest value as possible through strategies such as reuse and recycling, environmental sustainability’s goal is to reduce the harm on the earth’s ecosystem by reducing waste and other negative outputs, such as CO¬2 emissions” (p. 5). Based on adapted SCOR processes for circularity, the framework “provides a horizontally integrated composition of performance measures to comprehensively assess the CSC’s performance from an economic, environmental, social and circular perspective”, thereby “enabling a clarification for the complex relationship between circularity and sustainability” (p. 9).
2.3. Digital Technologies and the Circular Economy
In recent years, digital technology and CE concepts have attracted growing interest in both the business and the academic communities, and a number of recent papers provide different perspectives on the relationship between the two concepts. Many of the early models and frameworks of digitalisation focused on the emergence of the technologies and their impacts on processes and organisational structure, possibly resulting in new business models [
47]. More recently, Lang [
48] identified sustainability as a driver of digital transformation and product transformation as one of its four key pillars, illustrating the relationships between sustainability, the CE and digitalisation.
Digital technologies can be defined as electronic tools, automated systems, and technological devices that allow very large amounts of data to be processed, transmitted and stored [
7] (p. 1). Two acronyms are often used as generic terms to encapsulate these technologies: SMAC (Social Media, Mobile, Analytics/Big Data, Cloud) and BRAID (Blockchain, Robotics, Artificial Intelligence/Knowledge Work Automation, Internet of Things and Digital Fabrication). Some authors specify some of these technologies as being of particular significance in promoting and supporting the CE. Frost & Sullivan [
49], for example, highlight the significance of IoT devices, robotics and mobile applications, acting in combination with analytical tools and optimisation software. Reuter [
50] argued that IoT can help promote the CE in the metallurgy industry by providing dynamic feedback control loops, whilst Salminen et al. [
51] maintain that IoT enables the improved management and analysis of data coming from various sources “to enhance services provision and the co-evolution of the circular economy” (p. 21). In similar vein, Bressanelli et al. [
52] explored how IoT, big data, and analytics, can support a transition to a CE. They identified eight specific functionalities, which were seen to be important in the transition process: improving product design, attracting target customers, monitoring and tracking product activity, providing technical support, providing preventive and predictive maintenance, optimising product usage, upgrading the product, and enhancing renovation and end-of-life activities. Owen-Jackson [
53] observed that “Internet-connected sensors can track the location, condition, and availability of assets in a supply chain. Direct exchange of information via secure, decentralised channels like blockchain can keep these communications secure. Together, these innovations can optimise resources, extend lifecycles, and help regenerate natural resources” (para. 10). Owen-Jackson [
53] also points out that digital technology “helps support dematerialization by reducing our reliance on physical resources – e.g., retailers selling e-books directly to consumers or digital video and audio being delivered online rather than through physical media” (para 14).
For manufacturing companies this requires changes in their business models towards a “Product/Service-Systems” (PSS) model, as noted by Pagoropoulos et al. [
54]. It entails a “shift from selling just products to selling the utility, through a mix of products and services while fulfilling the same client demands with less environmental impact” (p. 19). The authors found that digital technologies have often underpinned the move to a PSS business model with considerable economic, environmental and societal benefits. Ranta et al. [
10] conducted a multiple case study of CE business models enabled by digital technologies, using interviews and document data from four innovative Northern Europe-based companies. The authors identified “four key types of business model innovation for CE that is catalysed by digital technologies and vary in incremental and radical improvement to the resource flows, value creation, and capture” (p. 2). Antikainen et al. [
55] also suggest that digitalisation can been seen as one of the enablers of the CE by building visibility and intelligence into products, indicating location, condition and availability of assets.
Some researchers have looked beyond individual company environments to consider these concepts across supply chains. Del Giudice et al. [
56], for example, analysed the effect of CE practices on firms’ performance for a circular supply chain. Using data collected through an online survey distributed to managers of 378 Italian companies that had adopted CE principles, the authors found that in designing and promoting CE initiatives, companies must build value-added relationships by exploiting big data, which will stimulate both management and employees to adopt a collaborative approach. Bressanelli et al. [
57] take a different approach in putting forward a framework (
Figure 3) that “shows the linkages between digital technologies, circular strategies and practices, and sustainability performance” (p. 9). The authors conclude that digitalisation “enables a systemic redesign of products, business models, and value chains, impacting all the life-cycle phases of products to reduce material and energy consumption, reuse products, remanufacture components, and recycle materials”, and that this promotes “the achievement of enhanced sustainability performance in terms of environmental, economic, and social benefits” (p. 10).
Other authors have found only a limited exploitation of digital technologies in support of the CE. In exploring digitalisation as an enabler of a sustainable CE in Germany, Neligan [
58] analysed data from 600 manufacturing companies and found that traditional efficiency raising measures that optimise manufacturing processes are still predominant in the manufacturing sector, but that “the opportunities offered by digital networking for increasing material efficiency are only used to a limited extent” (p. 106). Wynn and Jones [
59] interviewed senior IT executives in eight European organisations and found that, although all organisations were pursuing activities to engender the transition to a CE, there was very little direct linkage to digital technology deployment. Digital technologies were nevertheless used by all these organisations, who saw more general benefits in terms of cost savings and efficiency gains that acted also in support of sustainability objectives, but not specifically for this purpose or in support of the CE. Cagno et al. [
60] also noted that digitisation and sustainability have so far been considered separately. They adopted the ReSOLVE framework, developed by McKinsey, to assess linkage between digital technologies and the CE. They noted the lack of an integrated and holistic analysis of the relationship between the two concepts and highlighted the need to investigate both decision-making processes and specific CE practices, from an empirical perspective. Montag and Pettau [
46] point out that “future research opportunities lie in the adoption of a digital performance perspective, depicting the impact of digital technology on the CSC performance” (p. 10). Overall, to date, literature on how digital technologies enable and support the CE across supply chains remains scarce [
61].
2.4. Conceptual Framework and Research Questions
A conceptual framework can be seen as a network of interlinked concepts that together represent an overview of the phenomenon being studied [
62], often in the form of a top-level map of the research area, providing the basis for subsequent analysis and model development [
63]. Elaboration of the conceptual framework helps the researchers focus on the key aspects of the research area in a textual or visual “big picture” [
64] (p. 15).
To transition to a sustainable and circular textile industry, the literature suggests there are three main conceptual areas of relevance: first, adoption of sustainable business strategies by alignment with triple bottom line accounting and the UN Sustainable Development Goals; second, migrating to CE practices by consistently following the R-principles that conserve resources and reduce waste and pollution; and third, the potential of digital technologies to act as a catalyst and driver for transition, which requires a coordinated and integrated approach involving holistic adjustments and changes within an organisation to the business model, products, and internal processes, as well as to cross-company processes along the entire supply chain (
Figure 4). This builds upon the maturity model developed by Montag et al. [
44], discussed above, which identified the three dimension of change - organisation, product and process - in transitioning to a circular economy.
To the authors’ knowledge, there are currently no models or frameworks for the transition to the CE in the T&C industry. This exploratory paper attempts to address this gap in the literature by building upon the conceptual framework outlined above. Available literature regarding the transformation towards a sustainable and circular T&C industry is very scarce and guidance for initiating such a transition is more or less non-existent. In this context, this paper examines how SMEs in the textile and apparel industry have approached sustainability and the CE to date and, more specifically, answers the following research questions (RQs):
- RQ1:
How are German textile and clothing companies addressing sustainability in their corporate strategy and activities?
- RQ2:
What strategies and activities relating to the CE are being pursued in the German textile and clothing industry?
- RQ3:
What role are digital technologies playing in the transition to sustainability and the CE in the German textile and clothing industry?