H&M and Coach are redefining business success with circular models
In the fashion industry, where decisions are often driven by revenue and sales, adopting circular business models can sometimes feel like an isolated sustainability effort. But brands like H&M and Coach are redefining success metrics to better integrate these models into their core business strategies. This shift not only supports sustainability but also strengthens competitiveness and resilience.
New Ways to Measure Success
The Ellen MacArthur Foundation’s project, The Fashion ReModel, is helping major fashion brands explore how to scale circular business models effectively. The project involves both high-street and high-end brands, focusing on how these models can be economically viable and lead to long-term success.
One of the key takeaways from the project’s first year is the importance of new success metrics. These metrics allow brands to quantify how circular models, like resale, rental, and repair, contribute to both financial growth and sustainability goals.
Revenue-Based Metrics for Circular Models
Traditionally, circular models were seen as side projects or niche initiatives. But now, brands like H&M are moving these models into the heart of their businesses. The company has made strides with resale models through Sellpy, Europe’s largest secondhand platform. In 2024, resale sales made up 0.6% of H&M’s total turnover—double the share from just two years earlier.
For H&M and other participants in The Fashion ReModel, establishing a clear revenue goal from circular business models is essential. This metric percentage of total revenue from circular initiatives—helps align teams and demonstrate the tangible financial benefits of sustainability.
Customer-Centric Value in Circular Business Models
One challenge circular models face is that their profit margins can appear lower than traditional, linear models. To address this, The Fashion ReModel partnered with NYU Stern Center for Sustainable Business to uncover additional value beyond direct profit margins, such as enhanced customer loyalty and engagement.
Circular business models allow brands to build longer-term relationships with their customers. By offering services like resale and repair, brands can turn one-time buyers into repeat customers, while providing new ways to engage with their audience.
Arc’teryx, for instance, has seen rapid growth in its resale and repair platform, ReBIRD. This initiative not only taps into new customer bases but also keeps products in circulation, helping to reduce waste and improve customer retention.
Quantifying the Climate Impact
Circular models also present significant climate benefits. By extending the life of products, businesses reduce the need for new materials and manufacturing processes, which can lower carbon emissions. Many brands participating in The Fashion ReModel are now using climate metrics to track these reductions.
Coach, under its parent company Tapestry, provides a clear example. The brand’s Soho denim bag, made from repurposed denim through a collaboration with Bank & Vogue, has significantly reduced greenhouse gas (GHG) emissions. A life-cycle assessment revealed that using repurposed denim cuts GHG emissions by up to 80% compared to traditional denim production. This is a strong selling point for Coach, as it helps meet Tapestry’s goal of achieving net-zero emissions by 2050.
Building the Foundation for Circular Business Models
While individual companies are taking action, the broader adoption of circular business models in fashion requires collaborative efforts. Increased investment in infrastructure, like product collection and sorting systems, will be essential for scaling these models.
Aligning on emissions reporting standards and creating policies that support circular economies will also be necessary. The GHG Protocol, which sets standards for measuring greenhouse gas emissions, is working on updates that reflect the realities of a circular economy. This can help businesses measure their impact more accurately and drive wider industry alignment.
