Summary Block

In its "2026 Circular Fashion Index" report, American consulting firm Kearney analyzed the circular practices of 241 fashion brands across 21 countries, finding that the most operationally demanding circular models—repair, secondhand fashion, and rental—remain underdeveloped: 63% of brands have limited repair operations, 66% are underinvested in secondhand fashion, and 89% are virtually absent from rental. The report proposes four levers, arguing for transforming circularity from a compliance cost into a value creation tool.

Key Points

  • Kearney's "2026 Circular Fashion Index" covers 241 fashion brands across 21 countries; 63% have limited repair activities, 66% are underinvested in secondhand, and 89% lack rental operations.
  • The report proposes four action levers: embed circularity into daily business decisions, turn regulatory data into management tools, divide labor with value chain partners, and extend economic accounting to the product's full life cycle.
  • Regulation is making circularity a prerequisite for market access; brands need to build reusable records when producing compliance data such as digital product passports, rather than creating separate data for each regulation.

Body

As circularity gradually becomes a regulatory requirement, Kearney has identified four entry points for brands to integrate circular models into their business models. In its newly released "2026 Circular Fashion Index," the firm assessed the circular practices of 241 fashion brands across 21 countries.

The assessment results show that the most operationally difficult circular models are generally underdeveloped. Brand participation in repair, secondhand fashion, and rental all falls short: 63%, 66%, and 89% of brands respectively have very limited activity in these areas. The report notes that whether these models can grow depends on three conditions: consumer demand, economic viability, and the ability to operate at scale.

At the same time, the regulatory environment is changing the positioning of circularity—it is no longer merely optional, but is gradually becoming a prerequisite for market entry. The core question Kearney raises is: will the money brands invest in this ultimately remain at the level of compliance cost, or can it be transformed into part of value creation and integrated into the business model itself?

To this end, the firm offers four action levers.

First, incorporate circularity into daily business decisions. It should not be merely an ancillary project managed by the sustainability team; merchandising, sourcing, finance, and operations departments all need to consider circular factors in their decisions and trade-offs: which collections to produce, which materials to secure, which services to develop, and where to direct funding.

Second, turn regulatory data into management tools. Brands must collect product and supplier information, especially data prepared for Digital Product Passports. Kearney recommends building reusable records rather than compiling data separately for each regulation. The same data set can then be used for design, sourcing, after-sales service, repair, resale, or end-of-life management.

Third, organize circular operations collaboratively with value chain partners. Collection, sorting, reverse logistics, and the processing of certain materials are difficult for a brand to accomplish alone. Kearney recommends clarifying each party's role: who does what, who measures results, and most critically—who bears ultimate responsibility to the consumer.

Fourth, extend economic accounting to the product's full life cycle. Brands should not focus only on the profit from the first sale; they also need to account for unsold inventory risk, future material availability, regulatory costs, and the value a product can retain or recover after first use.

This logic can lead to very specific decisions: developing certain products, redesigning others, investing in particular circular models, or abandoning them when economic benefits are poor and environmental benefits are not credible. In other words, a product's environmental impact should be taken into account before production decisions are made.

For the used clothing trade and secondhand apparel industry, the signals from this report are worth noting: the penetration rates of leading brands in repair, resale, and rental remain low, meaning there is still structural space upstream and downstream in secondhand circulation and textile reuse; and proposals such as reusable regulatory data and value chain responsibility allocation may also influence future collaboration between brands and secondhand recycling and processing parties.

Source: Circular fashion: how to turn a compliance cost into value creation · Originally published 2026-10-02