Chemical Fibers International 3/2022: Scaling...
Chemical Fibers International 3/2022

Scaling textile recycling in Europe

Karl-Hendrik Magnus, Senior Partner, McKinsey & Company
Karl-Hendrik Magnus, Senior Partner, McKinsey & Company

More than 15 kilograms of textile waste is currently generated per person every year in Europe, the largest source of which is discarded clothing and home textiles - accounting for around 80 % of total waste. The textile industry is a highly resource-intensive and waste-generating one that - in the face of rising climate-change disasters, increasing consumer demand for sustainable materials, and environmental awareness among brands, investors, and lenders - has to make a change to become sustainable and remain profitable.

The textile value chain at this stage is principally based on a linear “take-make-waste” logic, where resources are extracted to produce items that are often only used for a short time. As a result, most textile waste around the world ends up in landfills or being incinerated, causing adverse environmental effects, including waste generation, climate effects, freshwater usage, chemical pollution, and microplastic pollution.

Many approaches exist to address the waste problem. These include the reduction of overproduction and overconsumption of textiles, the extension of a product’s lifetime, and designing products for increased circularity. However, one of the most sustainable and scalable levers available is closed-loop, fiber-to-fiber recycling – turning textile waste into new fibers that are then used to create new clothing or textile products. Achieving closed-loop recycling will aid the textile industry to take the important step in moving from a linear logic towards a circular system. Fortunately, this space is characterized by fast-paced innovation and a race toward scale, including various recycling technologies, however further technological innovation and collaboration across industry stakeholders is urgently needed to fully unlock the potential of closing the loop.

There are 4 fiber-to-to fiber recycling technology archetypes mechanical, thermo-mechanical, chemical, and thermo-chemical – that differ in several ways, including in their energy efficiency and their ability to return to or keep virgin quality. Some of the technologies, like chemical recycling of pure cotton, are already established. Others, like the chemical recycling of polyester, have undergone intense R&D and are on the brink of commercialization. In general, the equally desirable traits of the ability to return to virgin quality and to be energy-efficient in the process are counter-correlated. For that reason, the long-term solution likely includes a multitude of recycling technologies targeting different market niches.

Once fully mature, McKinsey & Company analysis estimates that 70% of textile waste in Europe could be fiber-to-fiber recycled. The remaining 30% would require open-loop recycling or other solutions, such as producing syngas through thermo-chemical recycling.

The potential for greenhouse-gas emission saving of recycled fibers over virgin materials is significant. Analysis indicates that textile-recycling technologies could potentially reduce CO2e emissions compared to virgin-materials’ production by 20-30% on spun fiber level for certain fiber types. Such technologies could also reduce water and land usage, as well as some chemical usage.

Fiber-to-fiber recycling therefore needs to be rapidly scaled up – however, currently less than 1% of textile waste in Europe is fiber-to-fiber recycled due to several barriers to scale.

The most significant challenge in this regard is that all textile-recycling technologies rely on predictable sources of feedstock and are largely applicable to specific fibers or fiber blends – they have strict input requirements with regard to fiber composition and purity (for example, several of these technologies cannot recycle elastane). This requires careful textile-waste collection, sorting, and pre-processing, yet these steps are complex and limit the supply of feedstock. Currently, collection rates are around only 30-35%, and a large share of unsorted gross waste is exported outside Europe.

Textile sorters, in particular, play a critical role. Once textile waste has been collected and transported to sorting facilities, textiles need to be categorized into what can be reused, recycled, downcycled, and what has to be incinerated. Manual sorting is still dominant, however, which prevents this area from scaling, and technology needs to be refined to finetune real-life fiber sorting.

Pre-processing is also complex and costly. It consists of cleaning, removing parts that cannot be recycled (such as zips and buttons), and cutting into fabric swatches. It currently is another major bottleneck for scaling textile recycling.

Fiber-to-fiber recycling technologies need to expand their abilities further to handle fiber blends, lower their costs, and improve their output quality if they are to reach their full potential – these challenges presently prevent the circular textile economy from scaling. If these barriers were overcome, McKinsey analysis indicates that fiber-to-fiber recycling could reach 18-26% of gross textile waste by 2030.

The entire value chain (including textile collection, sorting, and recycling) requires investments to achieve this – capital expenditure investments of around €6-7 billion would be needed by 2030. McKinsey analysis indicates that the textile industry could, once it has matured and scaled, become a self-standing, profitable industry with a €1.5-2 billion profit pool by 2030. In addition, the textile-recycling value chain could create a new, valuable raw material that enables more apparel production in Europe, which could lead to additional creation value in other sectors.

Beyond the direct economic benefits, scaling textile recycling also unlocks several environmental and social benefits. For example, McKinsey analysis has shown that, in a base-case scenario, about 15,000 new jobs in Europe could be created and CO2e emissions could be reduced by around 4 million tons – equivalent to the cumulative emissions of a country the size of Iceland. And by quantifying into monetary terms several other impact dimensions, analysis shows that the textile industry could reach €3.5-4.5 billion in total annual holistic impact by 2030.

Major action needs to be taken quickly for textile recycling to reach a favorable state by 2030, as the identified bottlenecks are significant and will require all stakeholders across the value chain to act boldly to accelerate the industry’s development. Analysis has identified five main areas for success.

Critical scale: The industry must set bold scaling targets and meet them. The textile recycling value chain cannot operate at small scale – critical scale across the value chain is needed to provide sufficient feedstock to the necessary fiber-to-fiber recycling technologies and allow for them to operate at scale.

Real collaboration: Several of the main challenges are best addressed in a highly collaborative manner. Business leaders across the value chain, investors, and public institutions need to come together in Europe in an unprecedented way: they need to engage in a highly operational joint effort to overcome the barriers preventing scaling.

Transition funding: Transition funding is required in the short term for the textile-recycling industry to become self-standing and profitable. Examples of this include subsidies, such as Extended Producer Responsibility (EPR) and green premiums (potentially shared by brands and consumers). Public-private solutions may well be needed.

Investments: Significant capital expenditure is needed for several parts of the value chain to be built out almost from scratch. Analysis indicates, however, that sufficient economic value can be realized to make up for the required risk here. Private investors would lead this by taking initiative to finance building out of the value chain.

Public-sector push: Leaders of public-sector institutions need to help drive textile recycling. Measures here include driving up collection rates, limiting the export of unsorted textile waste, engaging in demand simulation, and creating harmonized frameworks for increased circulatory, among other initiatives.

Stakeholders can consider certain actions that will help achieve success in these 5 areas:

Brands and distributors can set ambitious goals and communicate them backwards in the value chain, adopt green premiums to hasten the scale up of technologies, create in-store collection sites, and design for circularity.

The public sector and NGOs can build awareness on the textile-waste issue, expand infrastructure for textile-waste collection, and increase incentives for sorting processes. They can also explore how public funds could improve the economics of the value chain, collaborate with EPR schemes across Europe to support a cross-border circular textile value chain, harmonize new and existing regulation throughout the EU, and explore how public procurement and buying can be used to accelerate demand.

Investors and entrepreneurs in sorting and recycling can look to create innovative and collaborative approaches to fund the substantial capital-expenditure requirements, while also investing time and resources into collaborative research projects for improved the sorting and pre-processing steps. In addition, they can pro-actively engage with the textile manufacturing value chain to define valuable collaboration for the end-to-end delivery of recycled fibers, as well as communicate with brands, textile manufacturers, and regulators about what is needed to bring the circular model to scale.

Lastly, textile manufacturers can adopt concrete circularity and sustainability goals on a strategic level, while allocating capital to fund next-generation equipment, and engage backward and forward in the value chain to help support the adoption of mechanically recycled fibers.

A significant transformation opportunity lies ahead in the textile industry that could result in a large, new, and sustainable industry. Collaboration is imperative. All stakeholders are strongly encouraged to think creatively for solutions beyond normal company parameters to find approaches that will develop and scale the required technology for fiber-to-fiber recycling—this is the opportunity to turn waste into value.

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