The EU vs fast fashion and the end of Linear Capitalism?
We look at a new policy proposal forcing producers to take more responsibility for waste, and whether laws can change the dominant economic model of Take-Make-Waste
Hi everyone,
We’ve all seen images of mountain-high piles of discarded clothing marring the West African or the Chilean desert coast, and we’ve probably heard the stat that over one third of all food produced globally goes uneaten. But, few of us grasp just how much gets produced and discarded every day.
Shein, a fast fashion behemoth last valued at $66B, adds over 10,000 new items to its ecommerce site every single day. The company 10Xed its revenue in just two years from 2020 to 2022, and makes more money than Tesla (greater total revenue, and higher margins).
In the US, people waste the equivalent of 149 billion meals every year — almost as much as in China, the world’s #1 food waste nation where 6% of the country’s total produced food is wasted. The second biggest food waste country might surprise you. India, home to over a quarter of the world’s undernourished people, wastes over 150 million pounds of food every year.
Most of us hate waste. There’s something viscerally disturbing about mountains of trash, and many people feel a core discomfort purchasing things that don’t get consumed. It’s also painful to consider the dichotomy of food waste across a global population that’s still hungry. And yet, the world seems trapped in the paradigm of linear capitalism — Take, Make, Waste — where we take raw materials from nature, make them into something marketable using minimum possible labor inputs, and waste or discard what goes unused or unsold.
Linearity feels so central to capitalism that it’s hard to imagine a different way. And yet, in the European Union, lawmakers on the Environment Committee have just voted to take a much bigger step towards circularity by increasing waste reduction targets across food, textiles and household goods and placing the burden onto producers through a policy of extended producer responsibility.
The new policy, which will go for its full parliamentary vote next month, will require a minimum 20% reduction in waste from food processing and manufacturing and a 40% reduction in waste across retail, restaurants, food service and households by December 31, 2030, with provisions to further increase these targets for 2035.
It’s not just a food waste law though. The Environment Committee is expanding the scope of of its waste reduction ambitions to include textiles and household goods through a policy of Extended Producer Responsibility (EPR), which puts more of the work of waste and recycling onto the shoulders of producers rather than externalizing it to society at large, which has been the default scenario throughout modern capitalism.
In theory, this could mean asking producers to take back end-of-life goods or otherwise participate in their collection and recycling. Over time, EPR is intended to flow upstream to affect the produce design process, encouraging less wasteful packaging, better demand forecasting and matching, and materials that can be recycled.
But in practice, EPR laws have been in place in some cases for decades, with patchy results. In electronics, where EPR has been applied the longest, waste tonnage is increasing steadily by double-digit percentages every year. In the United States, where EPR laws applied electronics have been around the longest, just 38% of this waste is recycled while the majority is incinerated or landfilled and made unrecoverable.
Part of the problem is the lack of a universal EPR policy. In the US, regulation has been state by state, with different laws applying to retailers and manufacturers across the 24 states that have some electronics recycling laws in place.
Beyond that, most states do not have EPR or circularity laws for any other categories such as food packaging, which today makes up 45% of all landfill mass in the United States. By the way, another 25% of landfill mass is food itself, so it’s clear that we have a long way to go on multiple fronts.
So, the EU’s law is not only the most comprehensive EPR attempt across markets and geographies, it’s also the widest ranging in terms of the categories it’s taking on.
The EU takes on fast fashion
The EU is a global capital of fast fashion.
Even though much of the clothing volume is produced in China and elsewhere in Asia, the companies are European, with a few notable exceptions like Shein, a Chinese company that nonetheless does the bulk of its business in Europe.
European producers like H&M, Asos, C&A, Inditex (owner of Zara and 6 other subsidiary brands) have infamously exported their fast fashion waste to former colonies now postcolonial nations struggling with climate disaster on top of their mountains of wear-once leggings and Halloween costumes. If you’ve ever been to any European capital or major city and visited its main square, you’ve likely seen dozens of these stores as common as Starbucks are in any US downtown.
Shein, which sells hundreds of thousands of items including dresses starting at $4 but all the way to automotive and household goods, is estimated to emit as much CO2 as 180 coal fired power plants for original product production (aka Scope 1) alone. As dirty as coal is, it’s not leaving tens of thousands of pounds of petroleum-based textiles to rot in the delicate Chilean desert ecosystem or along Ghana’s coast, where toxins within the materials are released into the air, groundwater and ocean.
Between 2004 and 2019, global clothing production has doubled. From 2000 to 2014, the average person has been buying 60% more clothing each year, but keeping their clothing items for half as long. I see this in my own life, where getting new clothes used to mean several time-consuming trips to the mall back in high school but today has become a frictionless, 1-click process.
In the world of climate money, it’s common to talk about the grid and EVs, since these areas represent the lion’s share of decarbonization. But fashion and food waste together account for nearly the same amount of emissions as all of transportation (including those private flights Taylor Swift is taking), and both are increasing every year.
Fast fashion is the ultimate expression of linear capitalism
Shein alone made $100B in revenue in 2022.
Of course, all that money costs something — and until we’re making joggers from carbon dioxide captured via direct air capture powered by renewable energy — every piece of fast fashion, every pet toy, every car organizer from the biosphere that we share with each other and with trillions of other living things, and we haven’t yet mastered the alchemy of turning those items back into the raw ingredients that made them possible.
Linear capitalism is based on a take-make-waste model of economic output.
Almost everything we see, touch and use is a product of linear capitalism.
It is based on a Taking action where raw materials are extracted from nature at the lowest possible cost.
It then goes through a Making action where these raw materials are turned into products with the least amount of labor, labor cost, and diffusion of wealth
These produced goods are sold at the highest possible price.
Finally, these goods are wasted, or disposed of, when they’re no longer useful.
Much of the wealth we observe in the world today, particularly that which didn’t originate from the Information Age of software and media companies, is based on Take-Make-Waste. The European Investment Bank has recently said that the Take-Make-Waste model of the linear economy is no longer working. They cite research from the World Bank that projects global waste generation to increase by 70%, or almost double, by 2050.
Can a single piece of legislation fundamentally reshape the entire modern global economic model?
Opportunity and deflation
The EU’s approach to EPR is saying that producers and purveyors all have a responsibility in guiding consumer decision-making. That could mean encouraging buying the right amount of food and the right types of food that you’re actually going to eat versus marketing foods that may not ultimately be successful or used, or that might mean more accurately predicting shelf life and taking better care of inventory so it doesn’t get damaged.
Some of these actions — like better inventory management and demand prediction — some of those actions benefit the producer because they help them waste less money. In those cases, they get to save on cost of goods sold, and therefore achieve better revenue efficiency.
But others of those actions are fundamentally deflationary for many producers under the current regime of Take Make Waste. If you encourage consumers to be more selective in their food or clothing buying, you could also be guiding them to divert less capital to you even if you sell more expensive goods, and not every brand can make a category jump from “cheap whimsy” to “quality that lasts.”
No one will volunteer to make less money for the same amount of work, and this is where I personally get stuck.
Should Shein stop selling hundreds of thousands of ultra low cost items and remake its business under the “Buy it for Life” paradigm? What responsibility does Shein the producer have in that decision process, and how much responsibility sits with the consumer who is choosing the lowest cost supplier they can find? If Shein becomes a Buy It For Life company, with the associated higher costs, lower inventory and lower turnover, will its consumers simply switch to someone else that will sell them something cheaper, faster, now?
EPR understands that supply creates demand
Shein has mastered a fundamental marketplace rule, that supply actually begets demand and not the other way around. Once a marketplace is up and running, the most proven way to drive its growth and attract new and repeat customers is by filling it with more new stuff. Famous marketplaces like Uber, eBay and Airbnb all understand the perils of a “zero page” where a marketplace search query results in zero matches; you should never leave your consumer hanging with nothing to offer them because you might never get them back.
Extended Producer Responsibility is a policy approach that understands this principle — that it’s not consumer demand but rather big producers’ hunger for capital ability, capacity to manufacture, and ability to create markets that drives consumption and therefore waste.
So where does this all go? Grocery stores make money by overselling you food that goes bad in your fridge and later creates methane in a landfill. Inditex has built a global empire on overselling you clothes that are defined by engineered obsolescence because they either wear out or go out of style. Everyone is looking for not only how to make the most dollars but more importantly the fastest way to turn over a dollar.
Does Extended Producer Responsibility and circularity signal the end of these business models?
My personal take is that this is going to be a painful transition, like many of the changes we’ll see in the climate transition.
In other words, there will be losers. The question is whether those who lose will be those who have historically lost for generations — like the people living along the Ghanaian coast amidst piles of degrading petroleum based polymers, not to mention other inhabitants of the biosphere — or whether it will be those who have been winning for quite some time.
Even though winners don’t cede their thrones willingly and it can be hard for us today to imagine a different future where we don’t Take-Make-Waste, in the very, very, very long run, linearity is finite.
The Earth, and indeed all things within the universe, is a series of overlapping systems, and every system is subject to a feedback loop. One day, the system will right itself. The question is whether we want to have a say in that process of rebalancing, or just hang on for the very bumpy ride.
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This week’s Climate Money podcast episode is all about EPR, fast fashion and food waste, using the EU’s new policy as a backdrop to this discussion. If you like what you hear, please share it with your friends and colleagues.
Climate Money is a solo effort and I welcome your tips and tricks for distribution, editing and production, and anything else.
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That’s it for this week, see you soon 👋
Susan