Circularity in fashion as a new business architecture
As regulatory pressure on the fashion industry intensifies and compliance becomes increasingly complex, more structured companies are beginning to see circularity not as a constraint but as a lever to rethink their industrial model. This is the turning point highlighted in the Monitor for Circular Fashion Report 2025/2026 - Transform to perform: leverage circularity for fashion’s future by SDA Bocconi.
After five years of work, the Monitor, which continues to map best practices and pilot initiatives, can now assess the level of corporate maturity in a radically changed context: ecodesign and EPR (Extended Producer Responsibility) are the variables redefining margins, supply chains, and market accountability.
Alongside these developments, interest in artificial intelligence as a management and competitiveness infrastructure is growing decisively.
When the rules of the game change
In recent years, the narrative around circular fashion has focused on experimentation, sustainable capsule collections, and pilot projects. In the meantime, however, the European Union has built a comprehensive regulatory framework that redefines the conditions for market access.
In this context, the Monitor has raised a series of managerial questions: What is really changing within companies? Is circularity still perceived as a cost and a source of complexity, or is it being understood as an opportunity for innovation and positioning? Which circular business models are gaining ground? Where are investments being concentrated? Which operational barriers remain unresolved? And which technologies are becoming enabling infrastructures for this transformation?
If the rules of the game are changing, competitive advantage will belong to those who can interpret them earlier and better than others.
An accelerator of differentiation
The Monitor for Circular Fashion is a multi-year, multi-stakeholder project that brings together brands, semi-finished product manufacturers, service providers, and technical partners across the entire value chain. The 2025/2026 edition is based on a structured analysis: desk research covering more than 30 updated sources, two separate surveys, co-creation workshops, and the validation of sector-specific KPIs.
The sample includes 27 organizations, both SMEs and large companies, covering all stages of the value chain, from raw materials to end-of-life services. It therefore offers a cross-cutting reading of the ecosystem.
The first striking finding concerns the business models adopted. Today, priorities remain strongly anchored to sustainable inputs, followed by life extension strategies and end-of-life solutions. In other words, circularity continues to be interpreted primarily as a matter of materials and product durability. More radical models, such as the sharing economy and product-as-a-service, remain marginal.
From the perspective of production chain actors, the main benefits of these models are not so much the reduction of environmental risk and raw material availability risk, but rather innovation, reputation, and competitiveness. Circularity is seen more as an accelerator of differentiation than as a regulatory shield. Service providers, for their part, place greater emphasis on compliance and regulatory pressure: two different perspectives that reflect different roles within the value chain.
On the social front, less reassuring signals are emerging. The most significant risks concern working hours, health and safety, and wages. But the real issue is harmonization: standardized tools are lacking, data are fragmented, and customer requirements are not always consistent. The result is a multiplication of audits and information requests that generates costs and inefficiencies instead of delivering real improvement.
From a technological standpoint, the shift is more pronounced. Investment priorities focus on recycling technologies, traceability platforms, the Digital Product Passport, and artificial intelligence. AI, in particular, is increasingly being integrated into forecasting, compliance, and supply chain optimization processes, signaling the beginning—albeit still at an early stage—of a transition from isolated applications to interconnected digital ecosystems.
A strategic choice
With the Ecodesign Regulation and extended producer responsibility, design choices directly affect future costs, environmental taxation, and market access.
This implies a revision of decision-making logic: design, procurement, logistics, and marketing must interact on new foundations. The Digital Product Passport, for example, must become a coordination platform along the value chain. Those who are able to use it strategically will be able to reduce information asymmetries, improve reputation, and strengthen consumer trust.
There is also a systemic issue. Without data interoperability, audit harmonization, and collaboration among stakeholders, the risk is fragmentation. The Monitor highlights the need for ecosystem coordination: the competitiveness of the sector will depend not only on the performance of individual companies, but on the collective ability to build shared standards.
Ultimately, European fashion must decide whether to treat regulation as a constraint or as a framework that rewards those who invest in quality, durability, traceability, and transparency. The Monitor suggests that part of the sector has chosen the latter path. And in a market marked by geopolitical instability and pressure on margins, turning circularity into industrial resilience may prove to be a choice that reconciles responsibility with competitive survival.
Francesca Romana Rinaldi et al. (2026), Monitor for Circular Fashion Report 2025/2026 - Transform to perform: leverage circularity for fashion’s future.
