Fashion brands understand the importance of circularity and many are making the effort to shift toward this model, but barriers remain with many struggling to implement and scale circular strategies.

According to new research from the Circular Fashion Innovation Network together with strategic delivery consultancy, Newton, four in five brands (responding to their survey) said circularity is a part of their five-year strategy (and 82% of these have already implemented at least one circular initiative), just under two-thirds (63%) of their customer-facing Circular Business Models (CBMs) are in a low maturity pilot phase. But many are struggling with implementation and scaling.

Premium and luxury brands face different challenges than high street retailers, whilst common hurdles around financial viability and customer communication persist across all segments.

50% of UK brands and retailers said limited financial margin is a barrier to circular initiative success, with 40% citing customer communication as a barrier. None of the brands with a customer-facing CBM, state they have the confidence or plans to scale.

The research included 49 fashion organisations in the UK, representing approximately one-third of the UK fashion market based on annual revenue. It covered a variety of markets and business models, with responses from over 10 retailers each generating over £1bn ($1.24bn) in annual revenue.

This report aims to serve as a foundational resource for organisations seeking to accelerate their circular initiatives. It provides in-depth analysis and insight into the current landscape, identifies three key principles to setting a circular strategy, and outlines four areas that organisations can address to scale up their CBMs initiatives:

Intention versus reality

Despite an intention to implement and scale circular business practices, brands are struggling to translate their aspirations into tangible roadmaps; 0% of brands with a customer-facing CBM state they have the confidence or plans to scale. CBMs are of varying maturity, and organisations lack confidence in their organisation’s overall plans, and ability to scale.

One size doesn’t fit all 

The attractiveness and feasibility of each CBM varies by value segment. In particular, organisations are hesitant to participate in initiatives that customers might perceive as irrelevant or inauthentic to the brand. However, brands are open to measures and targets that support choice, and flexibility and are relevant to organisations at different stages of their journey; 82% of respondents have already implemented at least one circular initiative. Interventions and standards can provide scope for this flexibility and support further innovation.

No silver bullets 

Despite varying levels of CBM success and adoption, the blockers to scaling different models are consistent and comprehensive. The biggest barriers are having a limited financial margin (c.50% of respondents) and customer communication (c.40% of respondents). The crux of the challenge will be in balancing profits with purpose, making circularity a viable business route for retailers and fostering sustainable growth in the ever-evolving industry

Why should fashion players prioritise circularity?

According to the report, Circular fashion has emerged as a “megatrend,” as highlighted in the Circularity Gap Report 2024, with discussions on the concept tripling over the past five years. This growing momentum provides businesses with an exceptional opportunity to unlock new revenue streams and competitive advantages through circular innovation. Circular business models aim to minimise waste and resource use while creating value by designing for longevity, repairability, and recyclability. Strategies such as take-back schemes and service based offerings like renting or sharing are at the forefront of this transformation, enabling companies to align economic success with environmental stewardship.

Meanwhile, the linear fashion model remains a significant challenge, driving the fashion and textiles industry’s substantial environmental impact. Responsible for an estimated 3–10% of global greenhouse gas emissions, the industry is one of the largest polluters. This linear approach —”take, make, use, dispose”— places immense strain on the environment by depleting natural resources, generating excessive waste, and contributing to widespread pollution. Transitioning to circularity is essential to mitigate these harmful effects and build a more sustainable future.

“Understanding and measuring the UK fashion industry’s progress towards circularity is critical for driving change. CFIN has been established to embed circular fashion ecosystems across the UK. In collaboration with Newton, experts in delivering complex organisational change, CFIN is gathering valuable insights into the current state of circularity. This research seeks to identify barriers faced by organisations and the support needed to transition to more sustainable systems,” reads the report.

“Armed with these findings, CFIN aims to empower UK fashion businesses to implement circular practices successfully. By supporting this transformation, the initiative aspires to reduce the industry’s environmental impact, foster innovation, and build a sustainable and prosperous future for UK fashion.”

What needs to happen for circularity to really take off in the fashion sector?

The report lists a series of recommendations both internally and within the bounds of current operations and initiatives that require longer-term investment, external change or have higher dependencies.

Brands gain support for their campaigns via engaging relevant third-parties.

Customer awareness and education through specifically designed training courses and customer visibility on garment design and manufacturing.

Cross-functional teams that have integrated sustainability functions and are upskilled through targeted training. Organisation-wise reporting of sustainability KPIs and using this to ensure accountability and prioritisation.

Share operational learnings with third parties and other brands and retailers.

Investment in internal infrastructure such as reverse logistics and the development of new networks.

Gain transparency across the value chain through engaging with relevant third-parties.

Legislation to ensure industry-wide consistency on model definition, acceptance criteria and reporting.

Legislation to promote circular principles such as waste reduction and challenging fast fashion.

Financial incentives such as tax reductions and penalties for breaching circular standards.

Support for brand campaigns through third-party sponsorship and collaboration with industry and government to accelerate high potential pilot schemes or CBMs.

Customer awareness and education through brand-agnostic campaigns and sponsorship activities.

Transparency across the value chain, including suppliers and stock-exit processes.

Volume flows consolidated through logistical changes, such as takeback processes.

“The future of circular fashion requires a fundamental transformation in business strategies and operations, far beyond minor process tweaks,” reads the report.

“This shift entails redesigning the entire value chain — from product design and manufacturing to distribution, consumption, and end of-life management — to integrate sustainability at every stage. To drive this change, we are fostering a collaborative ecosystem built on cross-sector solutions, partnerships, and innovation. By uniting brands, suppliers, governments, and consumers, and by investing in new technologies and business models, the fashion industry can accelerate its transition to circularity and achieve lasting sustainability.”

In a recent report the UKFT identified seven key priority areas for textile and apparel manufacturers to achieve circularity.