Adopting a Circular Business Model for Fashion | New Balance, swatchbook | PI Apparel

My name is Julia Weiner. I'm the left over there. I'm an investment associate at a firm called Closed Loop Partners. We're a hybrid investment firm and innovation center focused on the development and the acceleration of the circular economy. So this is kind of my bread and butter. I come from the fashion industry, and so I was brought into the firm to helped to build out our investment thesis for circular economy within the fashion sector. I've been with the firm for about 3 years, and in those 3 years, I've been exposed to many incredible innovators, changemakers within large organizations, policymakers, and I think we're really at a point in time where many exciting opportunities are happening to accelerate circularity in order to enable resiliency in supply chains and to drive profits and healthy business by leveraging models that do better for people, planet, and for the productivity of your businesses. So excited to, to dive in a little bit deeper with the folks over here today. So maybe I'll pass it over to them to give a quick introduction to who they are, what they do at their exciting firms, and also how they define circularity.

Awesome. Thank you, Julia. And thank you so much for having me here today. My name is Katie O'Brien. I work at New Balance. I've been at New Balance for about 8 years now. My background is actually in mechanical engineering, and also system design and management. So, I've been managing our sustainable innovation portfolio at New Balance for the past 2 years. We're super focused on using kind of like a data-driven approach to really drive impact at scale. I know that there are a lot of sort of lighthouse solutions out there, and smaller brands that are really driving and pushing on some of the bigger brands to do better, and we're really taking that initiative and really integrating that into a lot of what we're doing. and trying to do that at New Balance at scale. So, as far as circularity, you know, I am fairly new to the space of sustainability, but have been diving in over the course of the past 2 or so years, and have always been passionate about the space as well, and sort of had my introduction to circularity through the Ellen MacArthur Institute, and learned about it in terms of, you know, I think for many folks, their first impression when they hear circularity is, Oh, it's recycled products. I think that having the expansion from the definition of how Ellen MacArthur looks at it in terms of eliminating waste and pollution, keeping products and materials in use, and regenerating natural systems, I think it creates a much more holistic overview of what circularity is and can be and how we can leverage that to really minimize the impact of the whole industry, the whole fashion industry on on the planet. So excited to be here with Jason and Christie today, and Julia as well. And thank you for having me.

My name is— whoa— my name is Jason Eric Brown, and I'm the Chief Business Development Officer for Swatchbook, which is a digital material platform. My background, I am a material designer. I come from the footwear industry, working in material design development and sourcing for many years on both the brand side and the manufacturing side. And for us in digital, obviously we can iterate in the digital space, and so we're not using up precious resources of materials. But for me, when I think about circularity, it's such a complex set of problems to solve. But I always come back to the simplicity of reduce, reuse, and recycle, and how do we convert waste into raw material and get waste back into supply chains. So I'm really excited to be here today.

Thank you. Hi, I am Christie Kahler. I'm the co-founder and CEO of 4Days. 4Days is a fully circular business model specifically geared towards the fashion industry. I started in the industry 2 decades ago. At this point, it's crazy to say out loud, but started at The Gap, really saw business and business operations and growth at scale, moved on to start a mission-oriented startup in the luxury space and worked in developing economies, really harnessing the value of artisanal craft. And I think what kind of links those two experiences is that in every case, I saw the impact that our industry has on supply chain and communities, small and large, and really felt that we needed to take responsibility for how we were impacting. And as I similarly experienced circular economy through Ellen MacArthur Foundation and Cradle to Cradles fashion-positive leadership team found that this idea of a regenerative system that recaptures and reintegrates our byproducts of the industry, really intelligent. And if you think about the quantity of waste we produce, but also just at an individual level, the fact that it all sits in our homes and our closets and there's not much we can do with it, I felt that was the place to start. So with 4Days, we were really approaching the problem from a customer-centric, kind of perspective and saying, how can we ignite circular behavior? And then what are the systems we need to build to deliver on that promise? How do we get customers familiar with and comfortable with circular habits? And then how do we take all of those products that live in our homes or go to donation or typically go to landfill and start to put them back and reintegrate them into a system where we're making progress on that promise to regenerate? So that's what we do.

Awesome. And Chrissy, I might start my next question with you so we can send the mic on back. I think I always recognize you as such a thought leader in circularity. And as you mentioned, you've been doing this for decades. Kind of coming out of the industry and moving into this space where you're really designing a whole new business for consumers who might not even understand circularity and really having to educate along that process with circularity embedded in the DNA of your business. What have been some of the, I guess, biggest aha learnings along the way, both from the consumer perspective and that education piece and convincing people to give you their clothes, as well as maybe perhaps learnings that you've had from brands and other industry stakeholders?

Sure, yeah. I mean, I think when we started 4Days, which like inkling of an idea in 2018, people, particularly customers, were like, "Circular what?" And we're like, "This thing called a circular economy." And we realized at that point we really had to break it down and start to think about it, about how we're adding value to people's lives and how, you know, we say the circular economy is this giant, gigantic financial opportunity. Well, what does that really mean? And at an individual level, I typically ask I ask a room and I say, like, who here has too much stuff in their house? You can raise your hand. Right? That's where we started. That's the problem. And that's the first problem we can solve because it's one that everybody can relate to. And I think in an increasing— in a world where we're increasingly aware of where clothes go or how they might pollute and we might not know the details, if we can find a trusted kind of outlet and trusted partner to help us deal with that, that's a great first step. And so that's really how our business has evolved with the customer relationship, kind of starting with that, like, give us your old stuff, we're gonna tell you why circular products are better because we can regenerate them, and then the complexity comes in building the system to do that. And so that's where we've made products ourselves that we sell to customers so we can say, this is a circular product. Why is it circular? 100% fiber-to-fiber recycled. Why is 100% fiber-to-fiber recycling important? Because then nothing's wasted and it becomes a high-value product after that. And then naturally the question is, well, what about the rest? What about everything else I'm sending you? What do you do? And that's where we kind of get to dig in and start to say, well, here's the stack of clothing, here's what happens to combination fabrics, here's what happens to stretch. But I think what we've learned along the way from a more like systems and holistic systems change is that we really need a broad recapture program in order to start sorting and grading with a level of specificity that's kind of geared towards circularity. Right now, sorting and grading and resale is geared towards maximizing financial value, which is still a reality. So you have to work within that reality. How do we make it economically viable? But how do we recapture enough so that we can start to kind of get really focused on siphoning off some of those products? And we deal very much in the post-consumer space. And I think that's also something that is not often differentiated. You were talking about, like, just the utilization of recycled materials. Well, all recycled materials are are not made the same. Some are not recyclable. That's a problem. But also post-consumer is the problem we're most focused on. Capturing waste in the industrial cycle is a lot simpler. Capturing waste once it's gone out into your homes and it's mixed up, it's like chaos here, it's all out there and we don't even know what it is, to get that back and make sense of it again and get it to the next right thing and the next best thing, in some cases it might not be upcycling, it might be downcycling, but keeping it out of landfill, That's our number one objective. And I think where we sit now is doing that in partnership with scaled retailers. How can we help really drive this behavior forward, leverage the infrastructure we've built? Because it is about scale. That's where we'll make an impact.

Absolutely. And I think, Katie, I'm interested to hear a little bit of your perspective coming from the seat of working within a global brand. And, you know, New Balance was founded, what, in the early 1900s? Way before circularity was a conversation to be had. And I think of New Balance and I, you know, the words that come to mind are performance, aesthetic, comfort, quality. How do you prioritize circularity, sustainability, impact within the business while also meeting serving the core KPIs and the core kind of identity of the brand, especially when it's not something that's been embedded since day one? It's really, how do we plug this important kind of system for circularity into a growing business?

Yeah, it's a great question, and I think it sort of builds on what, what Kristi was saying in terms of like, she has built 4 Days on the premise of circularity and with those principles built in. And so how do you come into a global brand and try to transform that? There are a couple of ways that we look at it, and certainly there are so many things that we need to do as a brand, and sometimes it can be overwhelming in terms of what you prioritize first. The first thing that comes to mind, like, you are paving the way for how we interact with post-consumer product. And I think that as a larger industry, A huge part of our impact is also coming from post-industrial waste. And so it's a really good place to start, where we're understanding how we can change our designs so that we just make less waste. So we can make the same amount of product with 30% less input. And that's a really foundational place to start. We then also think about, how can we take any sort of necessary post-industrial waste and reintegrate that back into product? Replacing virgin materials in doing that. We certainly are starting to roadmap what happens with post-consumer product. And I think that what Christie is doing with 4Days, and a number of other brands are starting to come to the forefront in terms of how they're participating in recommerce for post-consumer product. And there's certainly, one of the things that we say in our team is, the most sustainable shoe is the one you already own. So how do we kind of drive that consumer behavior as one of these global brands, be able to educate our consumers in terms of the way in which they interact with our product. And I think that that ties in nicely to our Made in USA brand. So, we make about 3 million pairs of product here in the United States. Obviously, the localization of those supply chains is a great way of being more sustainable, both from a social perspective as well as an environmental perspective. Certainly, the legacy of that product, the emotional durability of that product, as well as the longevity of that product that's just built in from a quality perspective, naturally lends itself to a more sustainable product solution. I think that we have a ways to go in terms of how we start to transform a lot of our performance product and source product. Certainly, we're looking for ways of doing that and starting really on measuring it, understanding how much of an impact we have right now, and then coming up with solutions for how we minimize that impact.

Absolutely. And Jason, you know, you said it yourself, you come from decades of experience working within the industry, specifically textile and footwear supply chains. Fast forward, you're now working for Swatchbook, and I think of Swatchbook as a highly innovative solution, transforming the way that we leverage 3D assets in digital sampling processes. I'm interested to hear kind of along your journey, when did you make the decision that I want to step out of this long track record within textile supply chain to then go and work for an innovative startup that's transforming the way that we produce product? And when you got there, were you initially thinking sustainability, circularity, like, "This is a tool that allows me to remove waste from supply chains," or over time did you begin to learn and understand the power that these 3D tools and assets have to remove waste?

Well, I would say that the second most sustainable shoe is the one that we didn't have to make. And that is part of— sustainability wasn't, just to be honest, sustainability wasn't the primary driver for me moving from the physical world to the digital world. It's speed. You know, as designers, we know that we can do anything that we want, but we know that the sample's gonna take 2 weeks. So we have built this whole product, this whole industry, understanding, you know, iterating at 2-week or 4-week or 6-week cycles. So sometimes the best designer at the best brand, the best product, is like the 4th sample. And so moving over to digital, suddenly we have tools that we can iterate as fast as we can. We can see 1,000 different versions, and we can We can look at 10,000 different materials, and of course you're a designer, you have the intuitive sense of this is the Pantone. You spend a couple minutes looking through your Pantones, you pick that perfect red, you know, and you pick the print in this perfect blue, and in the old days we would have sent that out confidently and we would have waited the 2 weeks. But you know, sometimes when the sample comes back, it's not that the sample looks bad, it's that those Those are the wrong colors. Those colors don't look good. And now today, we can see that on screen in real time. So it's really the power to iterate as fast as you want. And you can iterate to your heart's content. And in a way, it becomes like suddenly you have the keys to the kingdom. And it can be a bit overwhelming at first, but I think— In the product creation process, we have a process of getting a go-to-market sample, you know, when production starts. And we have a first-round sample and a second-round sample and a third-round sample, and these are physical samples. And we have the ability today in 3D to visualize that first sample and make a lot of meaningful color and material and finishing decisions in 3D at that first sample, and even in the second sample, and even in the third sample. There's a footwear brand that I've been working with, and they are digital all the way up to their very— their first physical sample that they make is their production confirmation sample. And their sales force is out in the market selling and booking orders on using renderings on an iPad. And if you would have asked me, or any of us, 3 or 4 years ago if that was ever going to be possible. You know, in 3 years, I would have said, no, probably not. That's coming someday, but it's not going to be happening in the next 3 to 4 years. And it's happening now. It's happening today. So it's a small— you know, if you look at the pile of things that we make, the production run is a very large pile. But we do also have a very large pile of look development samples. And another thing that not a lot of us realize is when it's not just the garment, it's not just this garment that uses a half a yard of material. To make that one garment, the garment factory needed to order— they ordered about 15 yards of that material, and the mill has no ability to make 15 yards, and the dye house can't dye 15 yards. So a lot of times, just to make, you know, just this— let's get a look development sample of this twill pant. It might be 100 yards of material. So there's a lot of dark material. The pile of samples that we can— pales in comparison to the pile of the actual materials that were developed and manufactured to make those samples.

And I think something to highlight here, as I hear all of you speak, is that there's opportunities to enable and adopt circular solutions upstream before a product's even made, as you're kind of in the design room making decisions around, excuse me, what materials to use, kind of how you're thinking about creating samples and what volumes you're thinking about producing at, as well as all the way downstream to, you know, your consumer has bought this product, it now sits within their home and there's an opportunity to get that product back and either recapture for recycling, downcycling, resale, as you mentioned. And there's many different circular kind of business models that I think a lot of brands today are exploring almost as low-hanging fruit because it's an opportunity to communicate, uh, directly with their consumer, educate them, and get them excited about opportunities for circularity. I'm interested to hear from all of you as we think about— and everyone in this room and everyone at this conference came here today because we're all aligned in that we know there are challenges within our supply chains and that we're here today to talk about resiliency, agility, flexibility, How can we create better systems for production, as well as better systems for the people in our supply chains, the consumers who purchase our products, and then the end of life of those products or the recapture of those materials. So I'm interested to hear from you all a little bit about that resiliency piece and how you see circular business models driving resiliency in supply chains, both upstream and downstream at end of life, and how some of the brands and manufacturers in this room can think a little bit more deeply about enabling circularity in their own business models while driving resilient supply chains.

Well, I would say at the beginning, in previsual, you know, we have the power, we have the technology now, to pre-visualize in the prototyping phase before we get into production. And with digital product creation, which, you know, the pandemic has really accelerated. So I think that would be where I would start.

Yeah, I think one of the things that consistently comes to mind for me as we approach circularity coming from the brand perspective is the fact that we're all trying to solve very similar problems. And so, I think regardless of which sustainability team you go to, our priorities and our work streams overlap. And I think that there's huge opportunity to move away from some of the competitive nature that obviously we kind of implicitly uphold within within the industry and come together in this space of sustainability, knowing that there's a greater good that can be accomplished by working together. I think not only that, you don't need to kind of threaten your own brand differentiation by working together on sustainability, because there's an opportunity to share costs, share efficiencies, like thinking specifically about creating circular material models for post-industrial waste in a lot of the factories that we have overseas. You go to those factories and it's not just New Balance that's being made there. It's all of our competitors. We're all in the same facilities. And so when we talk about making moves towards renewable energy, we should be doing that collaboratively. We talk about, you know, setting up vendors in that space who can collect that waste and transform it into usable virgin materials. There's an opportunity to benefit from all of the collective waste that we're creating, process that together, and regenerate materials collectively rather than independently. So I think that that's what I would kind of speak to on the post-industrial side. I'm sure, Christy, you have thoughts on that, on the post-consumer.

Yeah, quite, quite similar actually. And I always say, like, if you take a step back, the thing that we're all doing is truly designing for circularity, and that's systems design, product design, materials design, industrial design, all of those things. And so it does touch every point. But I think on the resiliency side, absolutely, collaboration and aggregation, leveraging existing infrastructure is something we think about a lot. Not only is that just the best repurposing of existing kind of true hard assets like sorting and grading capacity, how do we modernize those? How do we increase the funnel of incoming products so that we can start to sort it economically in a way that can drive circularity into the systems, which I mentioned before. But doing that in collaboration is really critical. It's also critical just for getting the customer on board. If they have to do 15 different things in 15 different places, it gets really hard and really confusing. So, you know, I think it is the upstream and the designing for circularity and improving those systems, sharing there. And then it's also the reverse and the downstream sharing there so that we get this kind of really nice cohesive, connected system because that's where we'll find the economic opportunity. I think if we do it in silos, it will always be cost prohibitive. And we have to find an economic solution for this or it just will not be the way we live. So that's how we think about it.

Awesome. I know we're coming up a little bit on time, but I have one last question to ask you guys. And, you know, I spend most of my days speaking with entrepreneurs who are looking for access to funding to work with, you know, global brands of the world. And in their mind, when I ask them the question of what's, what's missing in the ecosystem to help you enable and accelerate and scale your business, a lot of the times it's financing in some cases. I'm interested to hear from you all. What's missing that, that we need? Collaboration, I think, is definitely a major piece of this, especially from a volumes perspective. But what else can we be doing as an industry to drive circularity at a faster pace? I also think standardization is a really important element that's missing most of the times. And that's, I think, collaboration, coming together and having a conversation about the shared kind of challenges within the supply chain leads to standardization of processes. So I'm interested just to hear from you all a little bit about what you think is missing or what you would like to see more of to drive circularity throughout the supply chain with consumers? Yeah.

Yeah, I can start. I mean, we haven't touched on traceability, which I think is a big one. And what does that mean and how complex does it need to be? There's a lot of conversation around digitized ID and serialization, and it might not even need to be that complex. Like, we just need to know what product is. When it goes out and comes back in. Traceability is, I think, something really important. More capacity is something we run up against, which is like domestic recycling capacity is, is actually very small for textiles, and it doesn't produce a product that can be reintroduced to the supply chain. There's not a supply chain that can actually connect to it domestically. So we're missing infrastructure, particularly locally for the US specifically. But I think even globally, we end up shuttling all this stuff around to get it to the right place. And then there's that technology layer, which is coming on more sophisticated material development, more sophisticated recycling development. All of that's coming, which is great, but it has to slot in and connect and make sense. So it really is the system itself, but just, I think, more.

Yeah, I think with digital, it's more simple because it's software and pipelining. And we're not talking about actual factories in real kind of products. I think the challenge is far more complex in the physical world. And like Katie was saying, you know, we might have 500 brands, but 80% of them are all being made in the same 12, you know, factory groups. And I think it's time for more industry collaboration. I mean, no single brand is going to solve this, this problem. This is our This is our problem. And I think collectively we, not just in the industry, but the brands, a lot of brands need to come together and a lot of the T2s need to come together. And I think the time is now. I think we're at a place today where we can get to that and do some of that in a way that we might not have been able to even just 5 years ago. So I think more industry collaboration. I think is required.

I won't say collaboration, even though that's my number one. I also think that just being able to measure impact— people are doing it in different ways and kind of taking different approaches, and it sort of overlaps with the standardization. But I think that if we look at the industry as— and we were to measure the impact of the entire industry as we start to adapt these circular models, It's not relevant unless it's reducing that impact. And so I think that we all need to be measuring ourselves in the same way, like thinking about science-based targets and making sure that every brand is measuring their impact in the same way. They know the materials that they're utilizing. They know the impact of those materials from a carbon perspective, from a water perspective. And if we're creating those standardized measurements— measurement tools for everyone to utilize, and they're utilizing those in the same way, then we can also demonstrate the progress, because ultimately that's what this is all about, right, is moving towards a circular economy that minimizes our impact and allows us to continue to be profitable. Absolutely.

I know we, we only have a couple of minutes, but maybe we can open it up to the audience if there's any questions for the panelists.

Hi, uh, what's the impact for the industry level, uh, the top line of the businesses? Like if you take as industry macro level, the reusability and less wastage definitely affect to the businesses and the manufacturers as industries. Like overall industries, obviously the long term, that would, that would give you like a better picture. But the short term, how do you see that impact from the business point of view? Because it's, it's the reusability is set into place. Obviously the numbers of the other you manufacture either stagnate or reduce. So that real impact to the top lines of the businesses. So how do we pitch to the businesses that circularity is something that we should follow through when you really have a financial impact to your business numbers?

Was it for anyone in particular?

No, it's general.

Okay, I'll start. It's an awesome question. I think it's definitely one of the things that that we all face, especially as we're trying to stand up these systems, because right now, in a lot of instances, it is more expensive, and it does have an impact to the bottom line. And so, when we think about creating more diverse revenue streams that can be built off of more circular systems, so we think about, instead of selling someone a new pair of shoes, say, "Hey, send us your shoes, and we'll charge you $20 to repair them." And so, it gives us an opportunity to, reduce the number of shoes that we're making over time, but still maintain profitability through different business models, like repair, like e-commerce, and then hopefully like recycling, where, as we start to think about those materials not only in terms of the purchase of those materials as a virgin good, but also the value of those materials from an environmental impact, I'm hopeful that we're starting to take into account the carbon accounting alongside the financial accounting. Right now we might be paying more for recycled materials, but at some point, as we start to utilize our own waste as a source of supply, I'm hopeful that that will offset the increasing costs of recycled materials.

A fabulous opportunity to develop or cultivate a new type of relationship with your customers too. Bring us your, you know, bring your old ingredients, bring your old products in. You know, it gets them back into your store, I would say.

Yeah, I think that's exactly right. It's this long-term relationship that becomes an opportunity. So, number of units, but value over time. That equation can shift. And as an individual brand, if you're delivering on that and providing both products and services to your customer, which You know, circularity can be a service in and of itself. That becomes very interesting from a lifetime value perspective. So I think there are, to reiterate, lots of opportunity for alternative revenue streams, longer-term relationships, continued profitability, and ideally, products become feedstock in a more financially viable way than using virgin materials. Then everybody is super happy.

So there's a lot of emphasis being put on the collaboration as an enabler of circularity.

Going forward, I was curious, is there any type, specific types of collaborative work that you'd like to see more of?

And what are the difficulties of that's standing in the way of implementing those more broadly?

I think some of the shared efforts, and I think that takes a lot of communication on what are you working on, what are you working on, where are your pain points. And it, in my view, starts there and saying, OK, how can we repurpose what's been built or what exists to help start driving change. Our focus is very much on the post-consumer and recycling. So for that, it's collection, sorting, grading to the level of feedstock and providing that feedstock back to recyclers. What we see is a lot of times, and we talk to potential brand partners in launching Take Back with them and helping facilitate sorting and grading, and they're like, you know, I just want my own products to be my new products. And I'm like, okay, that's never going to work. So we really have to increase the funnel, sort, take all the products, keep everything out of landfill, and, and be a conduit to kind of creating this mechanism at scale for the whole industry, not just for one person. So that's how we see it, which is like there's an aggregation of materials that's really necessary to drive these circular processes in the post-consumer space.

Sure, I'll just quickly build on what Kristi said. I think that some of the challenges are really around changing the paradigm of the competitive nature of the industry. So, like, we're built to compete against one another, right? And the way that traditionally it's gone is you differentiate yourself. Like, if you're a performance brand, for example, like, you create something innovative, you patent it, you hold onto it for as long as possible, and hope that, you know, when your competitors adopt it, it's a lot later. I think that that threat of having a competitor swoop in and take something that you're working on is really still pretty strong in the industry. And so, it will take, I think, repeated demonstrations of smaller-scale collaboration to show that there's opportunity for having a— the sum is greater than the parts in this space. There was a conference for footwear manufacturers at MIT that was put on by Dr. Julie Fuentes earlier this year that was starting to tackle some of those challenges. I think that it helps to have a neutral party, and especially in academia, to be able to go to that space and talk with your competitors and realize, yeah, we're all facing the same challenges here. How can we co-invest in transformation towards renewable energy, investing in material innovations? Investing in common infrastructure for take-back programs, standardizing the way that we tag our products so that we don't have 15 individual take-back programs that are all inefficient and that will push consumers away eventually, because they're not going to want to go here to ship back this and here to give back that. So I think it's a real change in the way of our typical ways of working, but it's potentially just we need to— demonstrate that there's an opportunity to unlock additional revenue streams through working with your competitors in a way that hasn't existed before.

I, I can also add, I think there's examples in other industries as well where pre-competitive collaboration has led to solving for some pretty big challenges, and I think I think to Katie's point, the industry is very competitive, competitive around IP, competitive around their suppliers, their contract manufacturers, wanting to have a competitive price point. And so much comes from economies of scale when people come together and invest in solutions for infrastructure, invest in solutions that can get product to market faster. And so there's so many efficiencies that come from collaboration and that economy of scale. And it allows the industry to move quicker to solve for challenges related, both environmental and social. And so I always feel really fortunate to be able to connect with people at large brands, to connect with innovators, to hear about the exciting momentum that's happening at all levels, and in order to drive collaboration, to drive active kind of change for industry as it relates to circularity. So, perfect.

Thank you.

Thanks.