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A Commitment to More Sustainable Clothing

Zalando is striving to reduce waste and make clothing a resource that can be reused.

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February 2022

Clothing presents a major sustainability problem. Seventy-three percent of clothing is thrown away, and much of that could have been reused, repaired, or recycled.1 Only 1 percent of clothing is recycled back into new textiles. Clothing production globally has doubled since 2002, and customers are buying 60 percent more clothes, but those items are now being kept for only half as long as they used to be.

Zalando, a Berlin-based online fashion retailer, is committed to establishing new business models and working with multiple partners to address this problem. The company is large and influential enough in the industry to encourage retailers, other brands, and key stakeholders in the fashion world to join its efforts.

Striving to Become a Circular Business

Zalando believes that fostering a circular economy for clothing creates opportunities to reduce waste and pollution, to keep products in use, and to help to develop regenerative natural systems. At the same time, this approach would ensure that the rights of people who work in the industry are protected. New business models for the industry could potentially unlock $560 billion in economic value.

While many people want to extend the life of their clothing, a massive gap exists between intentions and behavior because people don’t know how to preserve their clothing and there are insufficient resources to support them in that effort. There is a huge potential to close that gap and drive behavioral changes by providing education and more resources.

Younger generations were born into the sharing economy, and many are more likely to be sustainability minded. As a result, efforts to extend the use and ownership of clothes might be more readily accepted. Zalando plans to offer more circular economy options to this receptive audience. Initiatives on this front have already begun. In 2018, the firm introduced Zircle, a free digital app, where people can sell and purchase pre-owned clothes. With the app, users can digitalize their wardrobe to get an overview of everything they own. They can then use the app to plan outfits, sell their clothes, or shop for items from other users, while also sharing fashion tips with each other. Clothes can be sold either to other users, or directly to Zalando, in which case the consumer receives payment in the form of credits to Zalando’s Fashion Store, keeping them in Zalando’s ecosystem.

The overall goal is to help consumers move away from a linear apparel economy, which takes resources from the planet to make products, use them, and then throw them away. The shift will be to a circular economy in which materials never become waste. Instead, those materials would be kept at their highest-value use for as long as possible, being reused and manufactured, until they are eventually recycled into new materials and products.

A Significant Potential Impact

Extending the life of clothes by just nine months could reduce the carbon and waste footprint of clothing manufacturing by 20 percent to 30 percent. Zalando’s goal is to extend the life of at least 50 million fashion products by 2023.

Efforts Across Clothing’s Entire Life Cycle

Zalando is not only focusing on consumer behaviors, but also working with other businesses in the apparel supply chain to make clothing design and production more sustainable. The company is focusing on the four stages of clothing’s life cycle.

Stage 1: Design and Manufacture

This has the greatest potential impact because it’s the stage in which materials are chosen, and production processes are selected. Zalando is partnering with the Ellen MacArthur Foundation and the Berlin-based startup, circular.fashion, to develop circular criteria. One hundred percent of the firm’s buyers and designers for its private labels have been trained in circular principles. Zalando is also reworking its design process to increase the use of safe and renewable products that will last longer and are made to be remade.

Stage 2 and 3: Design and Manufacture

The firm is engaged in multiple efforts to help ensure that clothes circulate between these two stages as often as possible. The life of clothes can be extended greatly by encouraging people to consider practices like clothes rental and the use of “recommence” sites such as Zircle, where used clothes are bought and sold.

Encouraging this cycle of use and reuse also requires educating people on how to care for and repair their clothes. In a survey, Zalando found that 75 percent of people don’t feel confident about how to repair their clothes beyond replacing a missing button, and they don’t have easy access to affordable services that could repair clothes. Zalando is engaged in multiple projects to educate people on how to care for and repair their clothes and in pilot projects to make professional services—everything from cobblers to tailors—more easily available. That includes offering pick-up and delivery services to increase the ease of using these services. The firm is also taking the initiative to use more plastic-free packaging with its products.

Stage 4: Closing the Loop

This is the stage when the textiles used in clothes are safely captured; sorted by material, color, and composition; and then recycled back into new materials and products. To eliminate waste, textiles need to become renewable resources, but currently that is not the case for 99 percent of textiles, mainly because of gaps in recycling technology and infrastructure.

Zalando is working with partners to develop premium textile fibers. One partner is Infinited Fiber Company. It has created the textile InfinnaTM, which is biodegradable and requires only a fraction of the water needed to produce a similar amount of cotton. Furthermore, clothes made with the fabric can be recycled with other textile waste and reused. Zalando will use this regenerated fiber in its private-label production process. The firm has also taken a lead role in the sorting for a circularity project initiated by Fashion for Good, which is developing an open-source platform for matchmaking waste or resources to the right recycling innovators.

A Collaborative Effort by the Industry, Governments, and Consumers

Zalando is looking at the full product cycle and is engaged in initiatives at all four product stages. It is working with multiple collaborators to exchange knowledge and to learn about and test a variety of possible solutions. The goal is to become fully circular, and the firm recognizes that achieving success requires a cooperative effort between the entire fashion industry and governments. The firm is confident its investments in circular business models will encourage people to turn their good intentions into ongoing behaviors that dramatically change how clothes are used and reused.

Sustainable Development Goals

The Sands Capital six investment criteria tend to lead us to businesses that are innovators or vital facilitators of change in industries undergoing significant transformation. Zalando is one of many portfolio businesses that create impact by addressing at least one major social or environmental challenge identified by the United Nations Sustainable Development Goals (SDGs). Through its initiatives to foster a circular economy for clothing, Zalando is helping to address SDG 9, Industry, Innovation, and Infrastructure, SDG12, Responsible Consumption and Production, and SDG 13, Climate Action.

1 The source of the data cited in this article is the Ellen MacArthur Foundation

Disclosures:

The business profiled was selected based on its reported alignment with one or more U.N. Sustainable Development Goals. The views expressed are the opinion of Sands Capital Management and are not intended as a forecast, a guarantee of future results, investment recommendations, or an offer to buy or sell any securities. The views expressed were current as of the date indicated and are subject to change. This material may contain forward-looking statements, which are subject to uncertainty and contingencies outside Sands Capital’s control. Readers should not place undue reliance upon these forward-looking statements. All investments are subject to market risk, including the possible loss of principal. There is no guarantee that Sands Capital will meet its stated goals. Past performance is not indicative of future results. A company’s fundamentals or earnings growth is no guarantee that its share price will increase. The specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. There is no assurance that any security will continue to be owned by Sands Capital Management. You should not assume that any investment is or will be profitable. GIPS® Reports and additional disclosures for the related composites may be found in the Sands Capital GIPS Report. PT# 20210360

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