McKinsey : Could fiber-to-fiber recycling at ...

Could fiber-to-fiber recycling at scale be achieved by 2030?

(Source: McKinsey)
(Source: McKinsey)

Today more than 15 kg of textile waste is generated per person in Europe. The largest source of textile waste is discarded clothes and home textiles from consumers—accounting for around 85 % of the total waste. The generation of textile waste is problematic, as incineration and landfills—both inside and outside Europe—are its primary end destinations. This has several negative consequences for people and the environment. But a significant transformation lies ahead that could create a large and sustainable new industry that turns waste into value.

There are multiple ways to address the waste problem, including the reduction of overproduction and overconsumption, the extension of product lifetime, and designing products for increased circularity. One of the most sustainable and scalable levers available is fiber-to-fiber recycling—turning textile waste into new fibers that are then used to create new clothes or other textile products. This space is characterized by fast-paced innovation and a race toward scale. Some technologies, like mechanical recycling of pure cotton, are already established. Other technologies, like chemical recycling of polyester, have been subject to intense R&D and are on the brink of commercialization. Once fully mature, estimates indicate that 70 % of textile waste could be fiber-to-fiber recycled. The remaining 30 % would require open-loop recycling or other solutions like producing syngas through thermo-chemical recycling. However, today less than 1 % of textile waste is fiber-to-fiber recycled due to several barriers to scale that need to be overcome.

Collection, sorting, and preprocessing limit the amount of textile waste made available to fiber-to-fiber recycling. Collection rates are currently 30 to 35 % on average, and a large share of the unsorted gross waste is exported outside Europe. Furthermore, most fiber-to-fiber recycling technologies have strict input requirements for fiber composition and purity—for example, elastane is problematic for several of these technologies. Consequently, textile waste needs to be scanned and sorted according to the relevant input requirements. As another example, jeans must have their zippers and buttons removed—a problem that needs to be solved by preprocessing. Advanced, accurate, and automated fiber sorting and preprocessing are not yet developed. Finally, to reach their full potential, the fiber-to-fiber recycling technologies must further expand their ability to handle fiber blends, lower their costs, and improve their output quality—these bottlenecks prevent the circular textile economy from scaling. An analysis prepared by McKinsey’s Retail Practice indicates that by overcoming these barriers, fiber-to-fiber recycling could reach 18 to 26 % of gross textile waste in 2030.

(Source: McKinsey)
1The base-case scenario refers to a situation where 50% of EU-27 and Switzerland’s postconsumer household textile waste is collected, up from today’s 30–35%.2The 2030 upside case refers to a situation where 80% of EU-27 and Switzerland’s postconsumer household textile waste is collected. 3Refers to the collection rate of postconsumer household waste. Total collection rate is slightly di.erent due to other waste streams having other collection dynamics. 4There are di.erent ways of de_ning what share of textile volume is “available to recycling.” This paper uses the term to describe textile waste that is collected and does not have an alternative use with a higher value that is further up in the waste hierarchy (for example, resale). Of the share that is available to recycling, there may be _ber fractions that technically are not eligible for _ber-to-_ber recycling. Our base-case scenario with allocated textile waste to the di.erent recycling technologies assumes—based on our analysis of forward-looking feedstock purity requirements by recycling technologies—that 70% of what is available to recycling can technically be recycled. 5Can either be open-loop recycled products like cleaning rags, or thermo-chemical recycling to create syngas. 6Here de_ned as _ber-to-_ber recycled volume divided by total gross waste. The rate re.ects the estimated full potential of _ber-to-_ber recycling of 70% of what is available to recycling. This number excludes open-loop recycling. Source: Deloitte European Market Study for ETSA, 2014; Ellen MacArthur Foundation; European Commission Joint Research Centre (JRC), 2021; EurostatProdcom; expert interviews; Higher Institute for Environmental Protection and Research, Italy reports #1 and #2, 2021; Humana Annual Report, 2020; Intecus, Germany report, 2020; JRC Technical Report, 2021; Le Figaro, 2019; Modare, Spain country report, 2021; Nordic Council for Ministers Baltic Countries report, 2020; Rebel, Netherlands report, 2021; ReFashion, France report, 2020; unweltbundesamt, Austria report, 2022

To reach this scale, we estimate that capital expenditure investments in the range of €6 billion to €7 billion would be needed by 2030. The entire value chain, including textile collection, sorting, and recycling, requires investments to reach scale. This analysis indicates that this industry could—once it has matured and scaled—become a self-standing, profitable industry with a €1.5 billion to €2.2 billion profit pool by 2030. The textile recycling value chain could create a new, valuable raw material that enables more apparel production in Europe, which may lead to additional value creation above what is quantified in the report “Scaling textile recycling in Europe – turning vaste into value”.

Beyond the direct economic benefits, scaling textile recycling unlocks several environmental and social benefits. For example, in our base-case scenario, about 15,000 new jobs could be created and CO2e emissions could be reduced by approximately 4 million tons—equivalent to the cumulative emissions of a country the size of Iceland. By quantifying into monetary terms several other impact dimensions like the secondary effects to GDP from job creation, CO2
e-emission reduction, and water- and land-use reduction, our analysis shows that the industry could reach €3.5 billion to €4.5 billion in total annual holistic impact by 2030—coming to an annual holistic impact return on investment of 55-70 %.

Potential annual holistic impact by type and source for EU–27 and Switzerland as of June 2022,1 € million (Source: McKinsey)
1Based on selling prices comparable for virgin with virgin-quality output (for chemical recycling) and with 30% price discount if relevant quality degradation(eg, mechanical and thermo-mechanical recycling) and the operating-expenditure and capital-expenditure estimates from McKinsey analysis. The upper range of pro­t assumes green premium of 25%..2Full-time-equivalent estimates from McKinsey analysis and industry experts; average annual earnings of €26,000 assumed; ­scal multiplier of 0.67 assumed, meaning that €1 in wages increases economic growth by 67 cents. 3Mistra Future Fashion (summarizing various data points); McKinsey analysis for recycling technologies; Higg MSI; carbon cost: European Union Emissions Trading System (EU ETS). 4~2 hectar/tn ­ber output, average all ­bers; land rental price estimate: ~€140/ha, representing average of EU and low-cost country land prices. 5Water consumption estimate of ~600m3 water/ton ­ber output, average all ­bers; water price estimate: average of estimates in India and Bangladesh. 6The impact potential of all chemical usage improvements has not been quanti­ed separately but could be substantial.Source: Banglabuysell; “Dhaka WASA raises water price by 24.97% for households,”, Feb 2020; European Central Bank; Eurostat, 2021;
International Monetary Fund; Mistra.Future Fashion (summarizing various data points); Stockholm Environmental Institute

To capture this opportunity, collaboration and innovation will be key
The identified bottlenecks preventing scale are significant and will require several stakeholders to act boldly. Textile recycling in Europe will not reach a favorable state by 2030 unless major action is taken quickly. This report identifies 5 main ingredients for success.

  • Critical scale. The textile recycling value chain cannot function at small scale. Critical scale across the value chain is required to provide sufficient feedstock to the necessary fiber-to-fiber recycling technologies, and to allow for those recycling technologies to operate at scale. Therefore, the industry must set bold scaling targets and meet them.
  • Real collaboration. Several of the main challenges ahead are best solved in a highly collaborative manner. Business leaders across the value chain, investors, and leaders of public institutions would need to come together in an unprecedented way to engage in a highly operational joint effort to overcome the barriers to scale.
  • Transition funding. Although our analysis indicates that the textiles recycling industry could—once it has matured and scaled—become self-standing and profitable, transition funding will be needed in the near term. Examples of such funding include subsidies (potentially Extended Producer Responsibility [EPR] funding) and a green premium (potentially shared by brands and consumers). Public–private solutions may be needed.
  • Investments. Several parts of the value chain must be built out almost from scratch, which requires significant capital expenditure. Our analysis indicates that sufficient economic value can be realized to make up for the required risk. Private investors would lead this journey by taking initiative to finance building out the value chain.
  • Public-sector push. Leaders of public-sector institutions would have to help drive textile recycling. Measures include driving up collection rates, limiting the export of unsorted textile waste, engaging in demand stimulation, creating harmonized frameworks for increased circularity, as well as other initiatives.

Fiber-to-fiber recycling at scale can help address Europe’s waste problem by turning waste into value. The European apparel and textile industry can start expanding the required infrastructure for collection, sorting, and closed-loop recycling today. This report establishes the opportunity at stake for textile circularity and highlights actions required to capture it. Furthermore, we hope this report can be a foundation for further research and collaboration to establish textile recycling at scale in Europe.

The authors wish to thank their partners at Euratex, Brussels/Belgium, and its ReHubs initiative for their contributions to the report, as well as the many industry experts who took the time to generously share their experience, research, and perspectives on textile circularity.

Saskia Hedrich is a senior expert in McKinsey’s Munich office; Jonatan Janmark is a partner in the Stockholm office, where Moa Strand is an associate partner; Nikolai Langguth is a consultant in the Oslo office; and Karl-Hendrik Magnus is a senior partner in the Frankfurt office.

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