Application of Closed-Loop Textile-to-Textile Systems of SMEs in the Nordic Garment Industry

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Application of Closed-Loop Textile-to-Textile Systems of SMEs in the Nordic Garment Industry

Roope Anttonen

Haaga-Helia University of Applied Sciences Bachelor’s Thesis

2021

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Abstract

Author

Roope Anttonen Degree

Bachelor of Business Administration in International Business Report/thesis title

Application of closed-loop textile-to-textile systems of SMEs in the Nordic garment industry Number of pages and appendix pages

46+3

It is well acknowledged that the textile industry is encountering a variety of global

sustainability challenges. Whereas the environmental damage caused by the industry will affect its players' future competitive aspects and prospects of continuation, the industry is now seeking material flows from new sources. Furthermore, the European Union initiatives drive textiles companies to adopt new circular processes to their supply chains. Therefore, the thesis aimed to discover the Nordic garment small and medium sized enterprises' capabilities to organize a closed-loop textile-to-textile supply chain.

The theoretical framework of this thesis examines circular economy, closed-loop, and linear supply chain models. In addition, the diverse global effects of the textiles industry are explored to further the comprehension of the complexity of the operating environment and its influences. The framework is built to establish a broad understanding of diverse

approaches to the textiles industry ecosystems. Stakeholders influencing this and initiatives of governing bodies were taken into account in building the framework. Waste- generated material flows are crucial to the subject, and therefore reverse logistics and extended producer responsibility are examined.

This research-based thesis studied the impact of different influencers on the application of the circular textiles economy systems. The methodology of the research was a systematic literature review using qualitative meta-synthesis content analysis. A total of 20 different reports and large-scale studies were synthesized in the study to varying degrees.

The key findings of the research revealed that Nordic garment small and medium sized enterprises have growing opportunities to operate closed-loop textile-to-textile supply chains. However, different drivers, enablers, and barriers influence the application. The research discovered which of these are the most relevant factors. The drivers for creating a closed-loop system, either organizational, institutional, or consumer viewpoint, were found to have many similarities with the enablers. The enablers comprise factors relating to the infrastructure, market situation and characteristics, and societal structures. The SMEs were recognized to have various incentives to apply closed-loop textile-to-textile systems in their supply chains. However, the infrastructure and the utilization of a circular economy

ecosystem are still relatively undeveloped. The research identified inefficiencies in sorting and recycling operations and technology and scaling a new circular approach in the textiles industry. The introduction of new initiatives and regulatory frameworks, such as extended producer responsibility, contributes to the growth and efficiency of textile recycling

systems. Thus, it has an impact on the prevalence of textile-to-textile closed-loop processes for Nordic garment comanies.

Keywords

textile-to-textile, circular-economy, closed-loop, supply chain management, reverse logistics, Nordic garment industry

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1 Introduction

This document is a research-based bachelor's thesis for Haaga-Helia University of Ap- plied Sciences degree programme of international business with a major in supply chain management. The following chapter covers the framework, reasoning, and objectives for this thesis. Firstly, the reader gets introduced to the thesis topic and objectives. The reader then gets introduced to the main ideas and concepts of the thesis. The second subchapter introduces the reader to the various investigative questions that the thesis tackles. At last, the thesis' benefits and key concepts are presented.

1.1 Background

Even the average consumer may have seen a recent rise of new textile innovations to tackle the garment industry's sustainability issues. In March 2020, The European Commis- sion adopted its new circular economy action plan (CEAP), a significant part of the Euro- pean Green Deal – a sustainable growth strategy for its economy. (European Commission S.a.) The textiles industry is a priority sector due to its high use of resources and environmental impacts (European Parliament 2021).

According to the European Environment Agency (EEA) (2019a), private consumption of clothing, footwear, and household textiles counts as the fourth-largest cause of environmental damage for water consumption and use of primary raw materials. Textiles also re- quire the second largest area of land usage, behind food, and cause significant water pollution.

The current European Union (EU) waste directive framework tackles the issue of textile waste management by requiring its Member States to introduce and implement a textile collection method by the year 2025. The conclusion is that textile waste cannot be inciner- ated or landfilled anymore. (European Environment Agency 2019.) Furthermore, the CEAP includes, among other relevant issues, the improvement of the business and regulatory environment for sustainable and circular textile materials, production processes, and international transparency via international cooperation and separate textile waste collection guidance. These parts helped to build the theoretical framework of the thesis.

Therefore, the thesis author felt compelled to study how the implementation of closed-loop textile-to-textile systems affected the Nordic garment industry SMEs sourcing opportunities in 2021. They wanted to understand how the changes in the EUs’ legal framework may guide or even force garment companies to implement circular business practices.

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This thesis examined to study whether the companies see to or have succeeded in generating added value in textile-to-textile processes. The author also analyzed the opportunities and possible limitations around these practices. The author saw the value of this thesis topic to add available, timely, and topical research on the subject. In addition, it has a foothold in the author's professional interests in international business, circular economy design, and research and development in textiles innovation.

1.2 Research question

This thesis aimed to gather data to increase knowledge of the closed-loop textiles ecosystem in the Nordics. Furthermore, it aimed to create an overview of the current placement of material availability that is generated from textiles waste collection, sorting, re-use, and recycling practices. The outcome was information provision to Nordic garment SMEs of opportunities and prospects of textile-to-textile material flows.

The research question (RQ) of this thesis was: What are the capabilities of Nordic garment SMEs to organize a closed-loop textile-to-textile supply chain? The research question was divided into investigative questions (IQs) as follows:

IQ 1. What are the drivers for creating a closed-loop textile-to-textile ecosystem?

IQ 2. What are the most critical enablers affecting the adoption of a closed-loop textile-to- textile ecosystem?

IQ 3. What are the most significant barriers affecting the adoption of a closed-loop textile ecosystem?

IQ 4. How would extended producer responsibility for textiles affect the textile-to-textile recycling system?

Table 1 below presents the investigative questions, theoretical framework components, research methods, and results in chapters for each investigative question.

Table 1. Overlay matrix.

Investigative question

Theoretical Framework*

Research Methods ** Results (chapter) IQ 1. What are the

drivers for creating a closed-loop textile-to-textile ecosystem?

Global impacts of textiles industry, Circular

business ecosystem, Waste Management, Reverse logistics, and recycling

Systematic literature review qualitative meta-synthesis content analysis

4.1

IQ 2. What are the most critical

Circular economy, closed- loop supply chain,

Systematic literature review qualitative

4.2

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enablers affecting the adoption of a closed-loop textile- to-textile

ecosystem?

European Union's

regulatory framework and initiatives, Waste

Management, Reverse logistics, and recycling

meta-synthesis content analysis

IQ 3. What are the most significant barriers affecting the adoption of a closed-loop textile ecosystem?

Linear suppyl chain, Global impacts of the textiles industry

4.3

IQ 4. How would mandatory

extended producer responsibility for textiles affect the textile-to-textile recycling system?

Circular economy, Extended producer responsibility, Waste Management, Reverse logistics and recycling

4.4

1.3 International aspect

It is necessary for a thesis that is written for a bachelor’s degree in the international business program to include an international aspect. Sustainability issues affect businesses globally. So even though these issues are typically regional or industry-specific, they are also relevant to all businesses regardless of their geographic location. The international aspect of the thesis was taken into account by its geographical demarcation of the Nor- dics.

1.4 Demarcation

This thesis aimed to look into how the Nordic garment industry can get supply for textile- to-textile production. The research question demarcates the research of the topic in various ways. The author chose to focus on Nordic countries of Denmark, Finland, Iceland, Norway and Sweden because they found out about an action plan by the Nordic Council of Ministers for sustainable fashion and textiles; Well Dressed in a Clean Environment from 2015 (Watson, Elander, Gylling, Andersson and Heikkilä 2017). They became inter- ested in making a follow-up about where the industry is today. The size of the companies in focus was SMEs and their ways of organizing their supply chain functions and processes. The author wanted to study the context of the structures of these activities regarding the realization of closed-loop textile-to-textile application. Demarcation of closed-loop and textile-to-textile means that the thesis only focused on material sourcing utilizing those types of processes. The thesis was demarcated to include only the garment industry

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home furnishing textiles). This was done for a focused viewpoint and to suit the professional interests of the author. The textiles industry in the text refers to the garments industry.

1.5 Benefits

This thesis can be helpful to any company, sourcing professional, supplier, B2B customer, consumer, institution or other entity connected to the garment industry globally. It provides timely information on the current recycling practices of textiles in the Nordics. It can be used as a snapshot of the Nordic garment industry's textile-to-textile material availability and sourcing efforts. It can share new information of different means and solutions to implement textile-to-textile material sourcing practices. This thesis can bring value to companies and their sourcing professionals via gathering information on textile-to-textile sourcing opportunities. Producers can get more information about demand. The B2B customers can get more information about supply and the factors affecting it. Consumers can benefit by reducing their carbon footprint when textile-to-textile produced garments are widely available on the markets. Natural resources are saved when the stakeholders act to reduce their carbon footprint or handprint. The author believes that they can benefit from gaining this type of industry-specific detailed information professionally.

1.6 Key concepts

Supply chain management (SCM) is

"the management of all activities, information, knowledge and financial resources associated with the flow and transaction of goods and services up from raw materials suppliers, component suppliers and other suppliers in such a way that the expec- tations of the end-users of the company are met or surpassed" (Weele 2010, 18).

Sourcing refers to the activities of finding, selecting, contracting, and managing the best possible source of supply on a worldwide basis (Weele 2010,10).

Circular economy, according to The Ellen McArthur Foundation (EMF) (2021), is a con- cept which aims to decouple gradually economic activity from the consumption of finite resources and design waste out of the system. The continuous flow of technical and biological materials through the value cycle in an almost closed loop is illustrated in the term.

Closed-loop, is a supply chain model, where materials are recycled repeatedly into new materials. The model allows the materials to maintain their quality and value. (Finnish Textile & Fashion 2018.)

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Textiles waste means textiles that are removed from use because they are no longer us- able in their current form. For example, the Finnish waste legislation classifies all unsorted discarded textiles as textile waste. Currently, textile waste is sorted as mixed waste and is directed towards energy production. (Finnish Textile & Fashion 2018.)

The textile-to-textile process occurs when textile companies engage in closed-loop systems by using recycled-content fibers or fabrics in new textile products and designing products with recycling capabilities by using existing processes (Watson & Al. 2017).

Extended producer responsibility (EPR) is an EU environmental policy approach for producers' financial and organizational responsibility for collecting or taking back used goods. This includes also sorting and treatment of the goods for recycling. (Bourguignon 2016.)

SME refers to small and medium sized enterprise. An SME is a non-subsidiary, independ- ent company that has less employees than a given number. This number varies across countries. There are differences in the amount of a company counted as an SME. The Eu- ropean Union sets this figure at less than 250 employees. (OECD 2005.)

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2 Drivers, Enablers, Barriers and Practices that Impact the Material Flow for Textile-to-Textile Systems

This chapter focuses on the theoretical framework that underlines the decisive concepts of this thesis. It is necessary to understand the framework to be able to assess the research data critically. The central concept is the textile-to-textile closed loop supply chain, which may be achieved by combining the surrounding factors of the framework. The surrounding concepts were carefully selected and were necessary for the theoretical framework, which is illustrated in figure 1 below.

Figure 1. Theoretical framework.

The author studied what drivers generate interest for Nordic garment SMEs to invest in textile-to-textile processes. They also studied the enablers and barriers for implementing such systems, referring to the societal structures and opportunities that can benefit or hin- der companies. Waste management, reverse logistics, and recycling were studied to understand further how they could generate value in textiles value chain.

Textile-to- Textile Closed Loop Supply Chain EU Textiles Strategy, Extended Producer Responsibility

Waste Management,

Reverse Logistics and

Recycling

Global Effects of the Textiles

Industry Linear and

Circular Economy

Models, Closed-loop Supply Chain

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2.1 Closed-loop supply chain

The foundation of closed-loop supply chain processes is influenced by industrial ecology, which is the subject of how energy and materials flow through industrial systems. It adopts a systemic approach to design processes that are built to minimize their global impact.

(Ellen MacArthur Foundation 2016.) It is a modern approach to resource management, which proposes establishing 'industrial ecosystems' optimized for the consumption of energy and materials, i.e., changing resource use from implicit to explicit, from the beginning of the cycle usage to the end of use (Weetman 2017, 16).

According to Flapper, Nunen & Wassenhove (2004, 4-7), various life-cycle phases can be operated in closed-loop supply chains. Companies need to decide for each phase if they want to create a loop in them, i.e., close that part of the supply chain. Specified, the phases can be in the production phase, distribution phase, use phase, and end-of-life phase. One, or various phases can be chosen to operate in a closed-loop manner. Figure 2 below visualizes the typical closed-loop supply chain flows.

Figure 2. The closed-loop supply chain model (Farooque & al. 2019, 10).

Guide & Wassenhove (2006) explain a closed-loop supply chain to improve companies' environmental performance via value recovery by bringing goods and packaging materials back to the producers. However, the extent of this is usually limited due to limited efforts

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chains or new ancillary channel members adversely affects such practices' operation.

(Moula, Sorvari & Oinas 2017.) A closed-loop supply chain can seldom reuse or recycle unwanted articles within the same supply chain; therefore, it still generates a considerable amount of waste. Therefore, a circular supply chain can be a better option to implement, because of its more sophisticated and comprehensive practices. (Weetman 2017.)

2.2 Circular economy

The circular economy concept is an economic model that aims to restore the value of materials and resources by producing them in continuous cycles instead of throwing them away (Fontell & Heikkilä 2017). The concept has deep-rooted origins and cannot trace back to a single author. However, the vision of EMF for the concept is widely recognized (Weetman 2017, 18). The circular economy has become increasingly known in modern economic systems since the 1970s (Ellen MacArthur Foundation 2016).

Figure 3. Circular economy systems diagram (Ellen MacArthur Foundation 2019).

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As presented in figure 3, the circular economy systems refer to two different material cycles: biological and technical. The biological cycle (illustrated in light blue) refers to the recovery of renewable resources. The technical cycle (depicted in dark blue) is where the components are designed to be re-used at the end of their life-cycle. A circular economy aims to sustain the economic value of the products as long as possible. (Weele 2018, 369-370). The concept acknowledges the importance of the economy working efficiently, responsibly, and globally competitively at all scales. It follows three principles:

1. Design out waste and pollution. A circular economy strives to minimize the harmful effects of economic activity on the environment. In addition, it aims to impact the preservation and restoration of natural capital and renewable resource flows.

2. Keep products and materials in use. A circular economy aims to preserve the value of materials and products by encouraging the re-use, recycling, and remanufacturing of these components.

3. Regenerate natural systems. A circular economy aims to avoid the use of non- renewable resources by encouraging the use of renewable ones. (Ellen McArthur Foundation S.a.)

Figure 4. Circular economy framework (Weetman 2017, 27).

According to Weetman (2017, 27), circular economy influencers can be blended into one generic circular economy framework. As shown below in figure 4, it builds on six different

Business Models and Relationships

Enablers and Accelerators

• Sharing and

exchange • Contracts and

services • Recover, recycle, reuse

Circular inputs

Product design

Process design

Circular flows

• Recyclable

• Renewable

• Safe

• Use less

• Use it more

• Use it again

• Use less

• Waste is food

• Renewable

• Reuse

• Remanufacture

• Recycle

• Biomimicry

• Green chemistry

• Systems-thinking

• Product stewardship

• Collaboration

• Certification

• Technology

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design, circular flows, and enablers and accelerators. As a whole, this can be considered as a circular economy ecosystem.

Teknologiateollisuus (S.a.) defines five circular economy business models; renewability, sharing platforms, product as a service, product life-extension and, significant for circular supply chains, resource efficiency. The principle of resource efficiency is that waste or by- products should be recycled into valuable resources and energy. The component of circular inputs refers to the design of a product or a process that uses sustainable resources.

The materials used in producing a product or a process should be non-toxic, renewable, or recycled. Specifying potential alternate materials could reduce future material uncer- tainty, thus advancing the security of supply. A good product design is viewed to consider durability, in order to aim for a long life-cycle and reusability by repairing and disassem- bling. Product, parts, and materials should be kept in a circular flow to maintain their highest value for as long as possible. The manufacturing process design should involve planning processes that minimize resource use and ensure the proper utilization of materials and process inputs, e.g., energy, water, and other process aids. For circular flows, it is essential to consider how products, parts, and materials can be recovered in reverse flows without losing their value. Re-use, remanufacturing, and recycling processes enable different opportunities for further maintenance of the economy. (Weetman 2017, 27-28.)

Accelerators and enablers bring value to the entire value chain. Enablers include several approaches. Product stewardship is particularly important regarding systematic change and a vital component of the circular economy. It supports the shift towards a more sustainable approach to consumption. It is evidenced by various factors, such as product life- cycle assessments, certifications, and transparency. The industry sector is also involved in product stewardship through its initiatives and policies. The governments participate through policy-making and legislation and presenting new tax policies. The circular economy framework is also supported by various, less systems-focused approaches based on resource efficiency, sustainability, and corporate social responsibility (CSR). (Weetman 2017, 28-29.)

2.3 Linear supply chain

Today's most common industrial production method follows a linear supply chain model, which is demonstrated in figure 5. The model acts on the extensive use of readily available and affordable materials and energy. The concept of the linear take-it-or-lose-it economy assumes that the extensive use of energy and resources is the only way to achieve sustainable growth of business and economy. However, this system can no longer meet the challenge of meeting the needs of a growing population and environmental impacts. In

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most cases, infrastructure and society’s support systems favour certain technologies and practices, making the transition to a more sustainable future challenging. (Seppälä, Sahi- maa, Honkatukia,Valve, Antikainen, Kautto, Myllymaa, Mäenpää, Salmenperä, Alhola, Kauppila & Salminen 2016.)

Figure 5. The linear supply chain model (Farooque & al. 2019, 10).

2.4 Global impacts of the textiles industry

There are two kinds of international economic networks: buyer-driven networks and producer-driven networks. The textiles industry differs from many other industries in that most large-scale producers act both as buyers and sellers. (Gereffi 2003.) In recent decades, the various production steps have become more rapid and complex. As a result, the different components of textile production have spread worldwide and resulted in an increasingly efficient supply chain. The value chain consists of five main components: raw material supply, components, production networks, export channels, and marketing networks.

The industry's economic value is distributed over the entire life cycle of its products, from the textiles from raw-material production to the end of life. (Gereffi 2003.)

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Figure 6. Simplified linear model of textiles production (Choudhury 2014).

The majority of the textiles production at present follows the linear model. Figure 6 above demonstrates the initial steps of production, consumption and disposal as waste. It is vital to consider the diverse impacts of the textiles industry practices. The European Parlia- ment (2021) declares that the amount of apparel bought in the European Union (EU) has increased by 40 percent since 1996, as the prices have declined. On average, Europeans use 26 kilos and discard 11 kilos of clothes yearly, which of most (87 percent) is inciner- ated or landfilled. Only below 1 percent of clothes are recycled as clothing. The current approach has many adverse effects globally, ranging from emissions, environmental con- cerns, and societal dimensions.

2.4.1 Societal impacts

Textile fibers can be natural or artificial; e.g., cotton, wool, and silk are natural as polyester, nylon, and acrylic are artificial. Although natural fiber production is concentrated mainly in a few areas, other parts of the textile production chain have also been located based on labor costs. Due to the rapid emergence of low-cost production methods, the primary production of textiles has shifted to developing nations. Thus, the garments industry is an excellent fit for studying the dynamics of buyer-oriented value chains. Its relative

Raw materials

Production of fibers

Production of yarns and fabrics

Wet treatments (dyeing, printing, finishing)

Sewing

Use

Waste Chemicals,

Water, Energy

Emissions

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ease of setting up businesses and the prevalence of developed-world protectionism have led to the creation of an abundant diversity of garment exporters.

The operations of the modern textiles industry in developing countries causes many societal problems. For example, many workers face unsafe working conditions and hazardous substances used in production (Ellen MacArthur Foundation 2017). The textile industry is a vital source of income for many developing nations. However, despite the increasing global trade, trade benefits have not reached the least developed countries. The competitive pressure on producers to lower their prices undermines their efforts to provide a good working environment. (Anner 2015.) The production chain is linked to the raw material sources and includes various steps such as dyeing, printing, and finishing. These processes involve multiple industries such as chemical and related ones. Cost optimization across the supply chain often leads to low pay and long working hours that contribute to modern slavery and child labor (Ellen MacArthur Foundation 2017).

2.4.2 Emissions and use of resources

Chemicals, water, and energy are used, and emissions are released to the environment throughout every step during the product's entire life cycle. The textiles industry mainly de- pends on non-renewable resources such as fertilizers to grow cotton and oil and chemicals to produce synthetic fibers and various other products. As a result, it consumes over 98 million tons of non-biodegradable resources annually. Water-scarce regions are also prone to experiencing issues related to textile production. (Ellen MacArthur Foundation 2017.) The vast footprint of the textiles industry goes beyond the use of raw materials and includes indirect impacts on communities. In 2015, the greenhouse gas emissions (GHG) from textiles production reached 1.2 billion tons. (Ellen MacArthur Foundation 2017.) The contribution is higher than those of all international airlines and maritime shipping com- bined (European Parliament 2021). Due to the high-volume use of chemicals, water pollution is also a leading global issue. For instance, the discharge of untreated wastewater from factories can affect negatively the essential water resources of local communities.

(Fontell & Heikkilä 2017.)

2.4.3 Ocean pollution

The industry pollutes the oceans and is identified as the primary contributor to plastics release (Fontell & Heikkilä 2017). Plastics release and break down into microplastics, which end up in the ocean, e.g., when textiles shed fibers to waterways during production processes and at the end user's use, i.e., consumers’, during wash cycles. The yearly release

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equals to 0.5 million tons, accounting for 35 percent of primary microplastics released into the environment. (European Parliament 2021.)

2.5 Circular business ecosystem in the textiles industry

According to McKinsey & Company (2019), more products are made from organic cotton and recycled materials than ever before. An analysis of 235 online shops revealed that, on average, 2.6 times more products were labeled as made with organic cotton and 3.3 times more with recycled materials. However, the absolute volume of the use of recycled materials is still deficient. The numbers are expected to rise since 55 percent of companies aim to source at least 50 percent of their products from sustainable materials by 2025. As the demand for sustainable sourcing increases, companies must develop a robust and coordinated approach to address social and environmental issues. This could be achieved by establishing a common industry standard and delivering it at speed and scale.

Figure 7. A simplified model for a circular business ecosystem (Fontell & Heikkilä 2017).

Fontell & Heikkilä (2017) presents a model for a circular business ecosystem for textiles.

A simplified model is showed above in figure 7. The hierarchy from top to bottom visualizes the economic and ecologic impact of materials. The less the product has to be further processed, and the longer it stays in use, the smaller are the negative effects.

Users

Repair

Re-use as a product

Re-use as material

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The first of the main processes in the textiles circular business ecosystem is started by the users. Whether consumers or professionals, the right attitudes and behaviors are the key enablers for these processes. Ideally, textiles should be used for the maximum duration possible. Then, they should be re-distributed to other potential users to be used again.

The next step for these materials is to be used as textile materials. Only when the quality of the garment is not suitable for re-use should it be recycled. Some industries are already using recycled textile materials as their primary raw material. However, to generate the highest value, it would be best to keep the materials in textile applications rather than shift them to a lower value application. (Fontell & Heikkilä 2017.)

Ellen MacArthur Foundation (2017) specify a new textiles economy to include four key ambitions:

1. Phase-out concerning substances and microfiber release

2. Remodel the design processes of clothing to lengthen their life-cycles 3. Improve recycling by reconstructing collection and reprocessing processes 4. Move to renewable resources and make effective use of all inputs.

These ambitions are designed to transform the existing textiles economy and create new business opportunities missed in the linear supply chains. Actions towards meeting these goals should be coordinated and systemic, and not impede progress in another area. First ambition aims to design out waste and pollution. The second and third goals are to keep the materials and products at their highest value. Increasing clothing utilization considers the innermost loops in a circular economy, which makes it particularly significant. When used, the materials are still valuable to different levels. Ambition is about all of the principles and aims to design out waste from textiles production and use resources effectively and efficiently. (Ellen MacArthur Foundation 2017.)

Due to this thesis's topic, the author focused on the third point, which emphasizes the shift of focus towards introducing textiles recycling at scale. Currently, at scale solutions to convert post-consumer waste to raw materials are not yet available. The number of available textile recycling technologies that can meet the industry's requirements is still relatively small. (Ellen MacArthur Foundation 2017.) The availability of recycled materials is a significant challenge for the industry. Looking at the share of companies planning on diverting used and discarded garments for recycling, the question of how to solve the logistics of sending them back becomes more pronounced. As the demand for recycled materials increases, the need for more technological innovation in the recycling processes will become predominant. Many companies plan to focus on sourcing recycled polyester or cot-

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ton for their sustainable material strategies but may find finding the right partners challenging. Investments are the biggest obstacle to achieving circular economy systems goals, and only 26 percent of companies are expected to make them before 2025. This is partly due to the complexity of implementing such an ambitious program. A large company's investment in circular economy leadership is more likely to gain a competitive advantage. As a result, many companies are exploring collaborations with retailers and man- ufacturers. (McKinsey & Company 2019).

Most of the textiles that are recycled in the EU are cascaded to lower-value applications, which are typically not recyclable after one use. The recycled input to produce clothing is usually downcycled from other industries. This accounts for c.a., 2%, and is mainly polyester. While this contributes to reducing virgin input into the textiles industry, it is a risk because it could prevent higher-value recycling in the future for other industries. It also sup- presses textile-to-textile recycling. (Ellen MacArthur Foundation 2017.)

The way garments are made and marketed makes it hard for recycling organizations to collect the total value of the materials. Also, the increasing number of synthetic materials and fiber blends makes it hard to keep the material value of the textiles. Creating an optimized palette of materials that can function suitably while also being recyclable is crucial in scaling up recycling. (Ellen MacArthur Foundation 2017.)

The challenge is to overcome these obstacles and capture the opportunity to recycle textiles at scale. This requires a coordinated approach that connects buyers and designers with the producers and importers of recycled materials. It helps them understand the materials available and the impact of their decisions on the recyclability of their garments. In addition, the industry needs to collaborate with retailers and brands to increase the collection of materials for re-use to support a new textiles economy. Also, innovators should be involved in designing new materials that are more sustainable and suitable for the circular business ecosystem. (Ellen MacArthur Foundation 2017.)

2.6 Reversed logistics

The implementation of textile-to-textile processes requires efficient waste and recycling systems. Systems that are required to deal with waste effectively and efficiently are called reverse logistics. It is about the movement of goods from a consumer to a producer in a distribution channel. (Murphy & Poist 1989). Reverse logistics include processes, which are utilized for recovering value from waste streams and reverse flows. It is a part of an overall supply chain optimization that aims to support closed-loop processes and fulfill legislative and environmental requirements. This concept refers to a strategy that involves

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arranging recycling or waste disposal for different organizations. It's considered a vital step in developing a sustainable business practice. A closed-loop supply chain involves the use of both forward and reverse logistics. Reverse logistics prevent the improper disposal of these products in less environmentally friendly channels, e.g., landfill and incineration. Thus, this supply chain management method enables companies to reduce their costs and improve their environmental performance. (Grant, Trautrims & Wong 2015,151-152.)

Figure 8. Hierarchy of waste management (Grant & al. 2015,151).

Figure 8 above illustrates how environmental performance can be determined by following the hierarchy of waste management. The concept includes the elements of Reduce, Re- use, Recycle, Recovery, and Disposal. The reverse direction of the pyramid reflects the amount of positive influence of its subdivisions towards ecological factors. Once a product is in the state that it should enter the reverse logistics systems, various factors must be considered before choosing the right waste management option. First, some used products are not suitable for re-use, recycling, or remanufacture. This is often due to the na- ture of the used product and the efficiency of the return logistics flow. Second, the recovered products must be transported to the appropriate logistics flows to ensure constant demand. These flows can then be used to reprocess the products at a later date. Finally, the value of the products and materials indicated needs to be considered. In most cases,

Reduce

Reuse, remanufacture, etc.

Recycle

Recovery

Disposal

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leadership efficiency. Therefore, it is crucial to understand the structure of costs and benefits of each actor. Reverse logistics can be implemented in various ways, which of pick up systems and public recycling centers are indispensable regarding textile-to-textile processes. Pick up system refers to a collection scheme, that allows consumers to dispose of used products, often at no charge. This service is usually operated by local municipals and commercial waste management companies for commercial organizations. Public recycling centers are offered by municipalities and are free or a cost-effective way for householders to dispose of their used products. Despite the various advantages of reverse logistics and waste management, they are still not optimal options for many companies. This is due to a lack of visibility and efficiency, support of infrastructure and producer responsibility. (Grant & al. 2015, 159.)

2.7 Extended producer responsibility

European Commission (2014) explains that Extended Producer Responsibility (EPR) is a policy approach that extends the producer's responsibility for a product from the development and manufacture phases to all of its life cycle. EPR involves shifting the administra- tive, financial or physical responsibility from governments to producers. In addition, it encourages producers to adopt an environmental-conscious approach to their products and services. For example, in the EU, under the WEEE, Batteries, and ELV Directives, producers are required to extend their responsibility for the collection, recycling, and disposal of end-of-life batteries and vehicles. Additional waste streams that producer responsibility organizations usually identify include tires, construction and demolition waste, and oil and paper waste. In addition, many other waste streams are also subject to obligatory or vol- untary producer responsibility systems.

In 2021, The European Commission considered EPR as a regulation to promote the management of textile waste. Currently, only France has a mandatory EPR for textiles. Never- theless, The Netherlands has requested an EU-wide obligation for the EPR. In addition, Sweden is to introduce its EPR for textiles in January of 2022. (European Union 2021.) EURATEX (2020), which represents the European Textile and Apparel Industry, declares that most of the EPRs that are currently running were designed decades ago for linear business models and are not suitable for the current conditions. Regardless that they have gained some support due to their characteristics, they are not yet fit for purpose as a policy tool to boost the circular economy and are not yet promoting broader sustainability across textile value chains. EURATEX (2020) proposes an EPR scheme to be applied to textile products within the EU, with the following attributes:

1. EPRs should promote circularity in textiles, address potential bottlenecks, and reward sustainable production.

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2. EPR should consider the differences between different textile products.

Most textile products have varying requirements and offer different business models. Although many of them have been studied and are likely to have cost/benefits, the impact of EPR is not yet clear. Understanding the various end-of-life options for textiles helps to formulate sustainable development strategies.

3. Many problems need to be solved to enable the widespread use of circular technology in textiles. This includes identifying the barriers to widespread adoption and the necessary organizational and technical changes. In addition, a newly designed EPR should address waste management costs, support local and short-term needs, and see the bigger goal of enabling circularity in line with the Green Deal and the Sustainable Development Goals.

4. No contradictions should occur across the EU in terms of EPR schemes for textiles. On the contrary, the same elements should be applied across the EU.

5. There should be an agreement for a single eco-modulation concept. The concept of varying fees based on the products' reparability, durability, and recyclability should be considered. This proposal is aimed at helping SMEs apply, e.g., the Product Environmental Footprint (PEF) and Environmental Product Declarations (EPD) methodologies in their production processes.

Zero or reduced eco-modulation fees, typically applied for products designed to be recycled or extended longevity, should be considered.

6. EPRs should not create unintended consequences. They should develop contradictions in Europe and distortion in the Single Market. They should not be applied at the expense of creating unfair costs and burdens for the European SMEs. EPR should not be detrimental to the 2nd hand clothing industry. It should not be used to distract or reduce the value of other textile sectors.

EPR should support collaborations that can help to achieve the circular economy through shared responsibility. This can be achieved by establishing partnerships that can support the flow of information and data and the pooling of materials.

2.8 The EU strategy for textiles

In addition of considering to extend mandatory EPR for textiles, the EU seeks to encour- age the transition to a circular economy in the textile industry in several ways. In March 2020, the European Commission adopted its new CEAP. The new action plan aims to promote a circular economy by focusing on how products are designed and manufactured. It aims to prevent waste and promote sustainable consumption. This is a vital component of the European Green Deal, a European Commission's commitment to transform the Euro- pean Union into a fair and prosperous economy that is energy-efficient and carbon-free in 2050. It aims to create a new path for sustainable and inclusive growth in Europe. In addition, it tackles climate change, natural capital protection, and the well-being of citizens.

The EU acknowledges that the goal of the Green Deal lies in uniting all nations and regions in a sustainable path. This Commission's strategy is fundamental to implement regarding the United Nation's 2030 Agenda for Sustainable Development. All EU actions

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must be bold and comprehensive to maximize the benefits of the European Green Deal.

The Green Deal encourages its partners to join the efforts and build alliances, as it requires coordination across various policy areas. (European Commission 2019.)

In response to the complexity of the textiles value chain, the European Commission is committed to developing a comprehensive Textile Strategy. The strategy focuses on addressing the industry's various challenges, such as the rapid emergence of new business models and the need for sustainable and circular textile solutions. The European Commis- sion (declares the measures to include:

- A new framework for sustainable textiles aims to promote circularity and re- sponsible sourcing by developing eco-design measures that ensure that textiles are made from sustainable raw materials. In addition, this framework will help consumers and businesses avoid harmful chemicals and promote re-use and repair services.

- Support the development and implementation of circular and sustainable textile production processes by improving the business and regulatory environment.

- Target to achieve high levels of textile waste collection and re-use and en- courage the development of new industrial applications. (

The goal of the initiative is to make the textiles ecosystem fit into the circular economy. It aims to address various weaknesses related to sustainable production and consumption and improve the collection and recycling of textiles waste. It initiates to identify and high- light actions associated with the whole value chain to improve the efficiency and effectiveness of the textile design. The legal obligation to separate waste textiles from the production of finished products will be supported in 2025.

2.9 Summary

The currently broadly adopted linear model of textiles production will inevitably cause un- reasonable harm to the environment and society. By implementing a circular economy framework and adopting closed-loop systems, companies can reduce the negative impacts of the industry. Additionally, they may gain economic and competitivity advantages over competitors through implementing new practices. Various external factors affect the extensive implementation of textile-to-textile systems. New strategies and action plans can support the structures that may ease the industry stakeholders’ shift to adopting these practices more widely in the textiles industry’s value chain.

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3 Research Methods

This chapter introduces and justifies the various data and data collection method used in this thesis's research. The chapter then walks through the multiple steps involved in the data collection and analysis processes. Finally, suitable methods were used for analyzing processes to get to the key findings.

3.1 Research design

The research design refers to a plan that includes the data collection methods to collect data needed to conclude the main research problem. (Burns, Veeck, Bush 2017, 92). The research was carried out as a systematic literature review using the qualitative meta-synthesis method, i.e., integrating findings from qualitative studies. The method is used to identify, select, and appraise a set of relevant data sources critically. The research design of this thesis is presented in figure 9 below.

Figure 9. Research design.

The author made all methodological and substantive choices to carry the process as a review protocol. To answer the IQs and conclude the RQ, the author decided on the appropriate search strategy, inclusion and exclusion criteria, and synthesis approaches. Follow- ing the decisions, the author searched for relevant secondary sources. Evaluation criteria

IQs 1-4 Data synthesis Descriptive data extraction

Systematic search

Search for secondary data according to inclusion and exclusion criteria Review protocol, including review objectives and investigative questions

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was applied to filter out irrelevant studies. Then, the relevant secondary data from the included sources was extracted. Lastly, in order to draw conclusions, the data synthesis was executed to describe, summarize, evaluate, interpret, and integrate the data.

According to Saunders, Lewis & Thornhill (2012, 317-318) there is an aggregation of advantages and disadvantages in conducting research using secondary data sources. Sec- ondary data analysis can enable the inclusion of large data sets in comparison to collecting primary data. The analysis of already existing data can allow a greater focus and effort in analysis and interpretation processes. Additionally, it can frequently be of higher quality than self-acquired data if available resources limit it. Secondary data collection enables the feasibility of including longitudinal data sources. Longitudinal sources may include, e.g., compiled data from industry statistics and reports, government publications, EU publications, books, and journals. The inclusion of multiple-source data sets was crucial for the synthesis-processes of the research analysis. Comparisons could be made to find relevant answers to the RQs with their regional and international elements by analyzing several data sources.

The use of secondary data sources carries some possible disadvantages. The purpose of the collected data may not relate to the RQ or IQs, in the same way, making the data pos- sibly inappropriate to address the RQ. It is also possible that the data only answers the question partly due to the discrepancy. E.g., the timeliness of source material may be an issue if it is an integral part of the research. The information obtained may be out of date and does not fully meet the objectives of the study. A disadvantage may also appear through the assumption that the desired secondary data already exists. That is not always accurate, and unnecessary time spent searching for material can affect the effectiveness of the research process. The obtained data can also be processed from a certain point of view and thus ignore essential issues for the correctness of the research to be carried out, as the source material has had different priorities. (Saunders, Lewis & Thornhill 2012, 319-320.) These factors were taken into account in the collection and evaluation process of the secondary data sources.

3.2 Data collection

The objective of this thesis was to research the position of the Nordic garment SMEs regarding the adoption textile-to-textile closed loop systems in their operations and how that reflects their sourcing opportunities for such materials. In order to find relevant data to ex- tract, the author implemented a three-stage process to evaluate the compliance with relevance-criteria. Firstly, the data was assessed against its overall suitability to the RQ and IQs according to their relevance of coverage. Secondly, precise suitability was assessed

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for answering the RQ and IQs. Thirdly, the author assessed if the data was beneficial to the research in its overall characteristics. Data were collected using selected keywords.

The keywords were used to narrow down the sources that appeared in the search process. Then, the topicality of the title was examined and considered. The suitability of the sources was then considered after reading the abstract and conclusions. If these were not available, the author went through the text using a list of sources and keywords. Finally, unsuitable sources were excluded from the study according to the preliminary criteria. The data collection and review methodology is presented below in figure 10.

Figure 10. Data collection and review methodology.

The search process of the review was made with a focus on reports of industry-related bodies (e.g., unions), governing bodies and peer-reviewed academic and scholarly publications. Because the study is based on data, for which there is such a large number of

Collection of sources

Utilized databases:

Haaga-Helia library databases, Google Scholar, Google search

The total of discarded sources was 87 The total of different sources included in the review was 21

Exclusion criteria

The source did not address the research topics

The context of addressing the topic did not correlate with the research topics

The geographical perspective did not correlate with the research

topics

The source was published outside the predetermined

time period

Inclusion criteria

Whether the source addressed the research topics

Whether the scope of the source was

appropriate

Whether the source addressed the subject

from context of textile supply chains

Whether the source was addressed from an appropriate geographical

perspective

Whether the source was published in the period 2014-2021,

i.e., is current

Key words

circular economy, closed-loop supply chain,circular textiles, fashion industry, garment industry, textile-to-textile, textiles collection, textiles recycling, garment collection, reverse logistics, circular textile ecosystem, circular design, circular

business models, the Nordics, European textiles industry, extended producer responsibility, EPR

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point of view and coverage, than studies carried out by individual practioners (companies).

In order to find related trends from the analyzed data, the author saw the need to only use source material which met certain criterion. To address the investigative questions from the point of view of the Nordics, the geographical perspective was taken into account in the selection of source materials. This was the case especially for investigative questions 1-3, which specifically sought to examine the effects on SMEs in the area. All Investigative questions also considered the EU-wide results, as its Nordic countries belong to the re- gion and thus take influence from the EU regulations and policies. In the case of the fourth investigative question, EU-level reports dealing with the situation in France, for example, were chosen as the source material for the research. When conducting the research, extensive producer responsibility was not yet put in force in any of the Nordic countries.

Therefore, it was somewhat challenging to find country-specific comprehensive reports to analyze. However, the study covered various policy proposals and analyses of new business models and infrastructural changes. The timeliness of the source material was also important to find current topics, and therefore the appropriateness of publication time was limited to a timeframe of 2014-2021.

The study covered a total of five Nordic countries. As a criterion the included and studied publications had to answer for at least one of the investigative questions. The author paid particular attention to the difficulties in selecting relevant data. The data of each investigative question had to be comparable in at least most respects. The author also greatly noted that the level of the sources was at least comparable. A large number of stakeholders influences the implementation of the operating model. Therefore, the author took into account that the material included in the research dealt with barriers as comprehensively as possible from different perspectives. The acquired secondary data dealt with the topic from the viewpoint of companies, of the impact of individuals' activities, markets, and society. Appendix 1 presents a table of all the secondary data that was included to answer the investigative questions. The table also designates the relevant study for each of the questions.

3.3 Data analysis methods

The research analysis was conducted by secondary analysis of qualitative data. The extracted data was synthesized by utilizing content analysis approach. The content analysis method helped to identify themes or patterns from the selected data sources. The relevant data from many different stakeholder or other perspectives influenced the data analysis.

Their significance and weight could thus vary, making the analysis challenging. However, it was appropriate for the study to look for trends on a large scale, so diverse data was of

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significant importance as long as its perspective was only appropriate for the research objectives. In questions examining the most significant factors, the author collected the results in data tables. The author was able to synergize and draw conclusions by noting how many studies mentioned the topic.

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4 Data and Results

This chapter presents the findings and analysis of the research reports studied for this thesis (Appendix 1). The questions from the secondary data were aligned to the key findings of each of the questions. The data is presented in tables. The collected data and analysis of the results are discussed in the following subchapters respective to their related IQs.

4.1 IQ 1: What are the drivers for creating a closed-loop textile-to-textile ecosys- tem?

The first investigative question intended to find out in detail the driving forces behind developing closed-loop textile recycling solutions. The focus was to investigate why garment companies would adopt circular practices and include textile-to-textile processes in their operations. The research was conducted by synthesizing the content of five reports. The included reports are presented below in table 3.

Table 3. Secondary data sources of drivers for creating a closed-loop textiles ecosystem.

The drivers of creating a closed-loop system for textiles could be divided into three different types: organizational drivers, institutional drivers, and consumer drivers. Drivers can be internal or external and be applicable simultaneously from both viewpoints. Organiza- tional drivers were often external, but internal factors were also seen to play a significant role in advancing circular practices. Companies may see it necessary to adopt textile-to- textile solutions in their supply chain due to an increase in global resource scarcity and price fluctuation. Economic reasons are central to why companies would adopt circular economy models instead of applying existing linear practices. The production of virgin materials to produce textiles consumes natural resources at an unsustainable rate. There- fore, besides economic reasons, it is also a matter of ensuring the continuity of material flows. Thus, an increasing amount of companies view it as imperative to develop new supply chains to support or replace the virgin raw materials they currently use. The adoption of circular practices has implications for production models in the industry. The changes in textiles production are also creating new innovative materials that may improve the quality

IQ 1. What are the drivers for creating a closed-loop textiles ecosystem?

Sources included in content synthezis

and analysis

Jia & al. (2020)

Salo, Suikkanen & Nissinen (2020) IVA (2020)

Sandvik & Stubbs (2019) Fontell & Heikkilä (2017)

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or characteristics of the products. The development of a circular economy for textiles was also viewed to bring new business opportunities. Some significant large Nordic garment companies that operate multi-nationally have found that circular economy practices give them a competitive advantage on a large scale. Waste is generated at all stages of the textiles value chain, and it is not economically viable to waste it. This creates incentives for companies to find new ways to save on raw material costs by utilizing waste streams.

Altogether, companies strive to ensure their long-term survival by developing new production models in a closed-loop textile ecosystem.

An essential institutional driver was raised for that legislative measures will be applied increasingly to constrain the availability of natural resources. This, in turn, increases the need for companies to develop new ways to access material flows. The introduction of new legislative and regulatory frameworks, as well as changes in taxation, serve as necessary drivers towards change. For example, the EU directive to which requires its Mem- ber States to sort and recycle textile waste from January 2025, will act as a driving force towards evolution from linear practices to circularity in the textiles sector. In addition, the Member States' own legislation was seen to have a significant impact on this. Necessary steps have been taken, for example, implementation of extended producer responsibility towards textiles, or consideration of it in some Nordic countries. The come up of new solutions towards recycling and sorting technologies and infrastructure were viewed as driving the development of a closed-loop textile-to-textile ecosystem.

Consumers have a significant impact on the industry's transformation as they act as primary stakeholders regarding the economic value they generate. The consumption of textiles is high, and the changes in their valuation were seen as a driver for a new kind of ecosystem in the industry. Therefore, together with legislative development, the consumer demand was identified as the most critical driver. Furthermore, the growing population not only consumes more natural resources but also expands the potential consumer base.

Therefore, fulfilling consumer demand sustainably to support companies now and in the future was viewed as crucial. Influencing the attitudes and opinions of consumers was em- braced as strengthening to the brand image of companies, thus generating competitive advantage.

4.2 IQ 2. What are the most critical enablers affecting the adoption of a closed- loop textile-to-textile ecosystem?

The second investigative question was formed to study the themes that act as enablers for companies to engage in a closed-loop textile recycling system. The enablers are asso-

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this approach. Closed-loop textile-to-textile systems' deployment drivers and enablers were found to have various overlapping relationships. Optimal for all stakeholders would be a situation where drivers and enablers meet. The author saw the need to research the most critical enablers that push the adoption of the whole ecosystems of closed-loop textile processes. A total of eight themes that mainly occurred in the researched secondary data could be considered the most vital enablers. The research included five reports to conduct the synthesis and analysis. Table 4 below presents the included reports, factors, and their incidence. All common factors with exclusions that emerged in fewer of the reports are presented in Appendix 2.

Table 4. Secondary data table of the most critical enablers of a closed-loop textile ecosystem.

Sources included in content synthezis and analysis

Theme adressed comprehensly

Rise in consumer awareness

Increased material streams of used garments and textiles

Design and use of new materials

Increased garment collection, sorting and stakeholder collaboration

Enhanced sorting and recycling technology

Regulatory and tax- policy adjustments

Investment falicitation

Extended Producer Responsibility Heikkilä & al.

(2021) Yes Yes Yes Yes Yes Yes Yes Yes

Sandvik &

Stubbs

(2019) Yes Yes Yes Yes Yes No No No

European Environment Agency

(2019b) Yes Yes Yes Yes No Yes Yes Yes

Dissanayake

&

Weerasinghe

(2021) Yes Yes Yes Yes Yes Yes Yes Yes

Watson & al.

(2020) No Yes Yes Yes Yes Yes Yes Yes

Progress of consumer awareness towards the textiles industry's negative environmental and other impacts influence meaningful behavioral change. Therefore, it was viewed as a meaningful part for enabling structural changes that promote circular efforts in textiles production. Consumers' positive attitudes towards recycled textiles were also seen as posi- tively affecting industrial development towards circularity. Consumers were perceived to be at least moderately invested in circular operating models in the textile sector. Educa- tion and training were seen as essential to inspire further adoption of new concepts and practices. To this end, the implementation of various educational and marketing cam- paigns was seen as necessary. Consumer behavior was seen to play a role in the growth

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and development of the market. Collaborative efforts were considered crucial for increasing demand and the volume of textile materials available for closed-loop processes.

The increase in available material flows was also seen as essential for promoting the gen- eralization of textile-to-textile production. The streams of post-consumer textiles available for recycling processes have increased steadily. However, the growth of material flows was not yet seen to offer comprehensive support towards industry needs. The varying properties and quality of the textile fibers that become available contribute to new innovations. The research and development of new fibers and production methods have enabled new innovative textiles to enter the markets. The use of new materials and new designs was seen to have various positive consequences on the development of circularity in the textiles industry.

Wide-scale implementation of garment collection and sorting processes were presented as critical enablers in implementing circular textile practices. In addition, adequate policies enhance the increase of stakeholder collaboration. The development of a suitable infrastructure for collecting and treating textiles waste was seen to be deficient but going in the right direction. The post-consumer textiles collection was viewed as highly fragmented amongst various stakeholders. Particularly charities, commercial waste collectors, social enterprises, and municipals were raised as influential operators. To enable the commer- cialization objectives of circularity in textiles waste, growing understanding and involve- ment in forwarding supply chain networks are required. The development of reverse logistics systems and supply chain capacities through technological innovations was viewed to increase resource capabilities.

Enhanced sorting and recycling technologies were identified as necessary to advance closed-loop textile recycling systems. In its entirety, the progress of technology was seen as a prerequisite for developing circular practices. Further innovation was viewed to be needed to overcome the challenges of material content identification and sorting efficiency. Specifically, the scaling up of these processes was viewed as critically necessary to enable developments in the textiles industry.

The economic viability of reverse logistics regarding non-reusable and reusable textiles was observed to affect the remaining of charitable and commercial collectors in the textile recycling sector. New investments in sorting and processing technologies were expected to contribute to establishing new economically viable recycling markets. A sufficient ca- pacity was considered necessary to run the activities adequately. Direct and indirect in-

Application of Closed-Loop Textile-to-Textile Systems of SMEs in the Nordic Garment Industry