Case study: Textile waste & fashion circularity — a leading company's implementation and lessons learned

H&M Group diverted 29,005 tonnes of post-consumer textiles from landfill in 2024 through its garment collection program, operating across 4,200 stores in 80 markets, yet that volume represented only 0.3% of the estimated 92 million tonnes of textile waste generated globally that year according to the Ellen MacArthur Foundation's 2025 Circular Fibres Initiative update. The gap between collection ambition and systemic circularity reveals the operational realities that every fashion company pursuing textile circularity must navigate. This case study examines how H&M Group built one of the most extensive textile circularity programs in the Asia-Pacific region and globally, what worked, what did not, and what investors and industry leaders can learn from the experience.

Why It Matters

The fashion industry generates between 80 and 150 billion garments annually, with an average utilization rate of just seven to ten wears before disposal in many fast-fashion segments. McKinsey and the Global Fashion Agenda estimated in their 2024 Fashion on Climate report that the industry accounts for 4% of global greenhouse gas emissions, with textile waste contributing substantially through methane generation in landfills and the embodied carbon lost when materials are discarded rather than recirculated. In the Asia-Pacific region, where H&M operates over 1,100 stores and sources approximately 70% of its production volume, textile waste management infrastructure remains underdeveloped. China, Bangladesh, Vietnam, and Indonesia collectively produce over 60% of global garment output but recover less than 12% of post-consumer textiles for reuse or recycling (Textile Exchange, 2025).

For investors, textile circularity represents both a risk mitigation strategy and a value creation opportunity. The European Union's Strategy for Sustainable and Circular Textiles, finalized in 2024, mandates Extended Producer Responsibility (EPR) schemes for textiles across all member states by 2025, with collection targets of 50% by 2025 and recycling targets of 25% by 2030. Similar regulatory frameworks are emerging in Japan, South Korea, and Australia. Companies that build circular infrastructure ahead of regulatory mandates gain first-mover advantages in compliance cost avoidance, brand differentiation, and access to secondary raw materials at predictable prices.

Key Concepts

Textile circularity encompasses the entire lifecycle of a garment or textile product from design through end-of-use recovery and reprocessing. The hierarchy of circularity interventions includes design for durability and recyclability, garment collection and sorting, reuse through resale or donation, mechanical recycling into fibers, chemical recycling to recover monomers or polymers, and thermal recovery as a last resort. H&M's approach addresses multiple levels of this hierarchy simultaneously.

Fiber-to-fiber recycling, the process of converting post-consumer textiles back into fibers suitable for new garment production, remains the critical bottleneck in textile circularity. Mechanical recycling degrades fiber length and quality, limiting recycled content in new garments to 20 to 30% without blending with virgin fibers. Chemical recycling technologies, including cellulose dissolution for cotton-blend fabrics and depolymerization for polyester, promise higher quality output but remain at pre-commercial or early commercial scale for most feedstock types.

What's Working

Garment Collection Infrastructure at Scale

H&M launched its garment collection program in 2013 and has scaled it to become the largest fashion retailer take-back system globally. The program accepts any brand and any condition of clothing, shoes, and home textiles through in-store drop-off bins. By 2024, the program had collected over 250,000 tonnes cumulatively, with year-over-year collection volumes growing at 8 to 12% annually since 2020 (H&M Group, 2025).

In the Asia-Pacific region specifically, H&M partnered with I:CO (a SOEX Group subsidiary) and local sorting operators in China, India, and Japan to establish regional sorting centers capable of processing collected garments into reuse, recycling, and downcycling streams. The Shanghai sorting facility, operational since 2019, processes approximately 3,000 tonnes annually and achieves a 55% reuse rate (garments resold through secondhand channels), 35% recycling rate (converted to cleaning cloths, insulation, or fiber), and 10% thermal recovery rate. These metrics compare favorably to the global average of 20% reuse, 25% recycling, and 55% landfill or incineration for collected textiles (Textile Exchange, 2025).

Investment in Chemical Recycling Technology

H&M Group has committed over $100 million in direct investment and strategic partnerships to advance fiber-to-fiber recycling technologies. The most significant investment is in Renewcell (now Circulose), a Swedish company that converts cotton-rich textile waste into dissolving pulp suitable for viscose and lyocell production. In 2022, H&M became the first major retailer to launch products containing Circulose fiber at commercial scale, with over 2 million garments sold containing recycled cotton content by 2024.

The partnership with Hong Kong Research Institute of Textiles and Apparel (HKRITA) on the Green Machine hydrothermal chemical recycling technology has produced a pilot facility in Southest Asia capable of separating cotton-polyester blends, the most common and most difficult-to-recycle fabric composition representing 35 to 40% of all garments. The HKRITA pilot processes 3 tonnes per day and achieves 90% fiber recovery with quality metrics comparable to virgin inputs (HKRITA, 2024). H&M has committed to licensing this technology for a 50-tonne-per-day commercial facility in Bangladesh, with commissioning targeted for late 2026.

Circular Design Integration

H&M implemented its Circulator tool, a design-stage assessment framework, across all product categories in 2023. The tool evaluates designs against circularity criteria including mono-material composition (enabling easier recycling), mechanical durability, disassembly potential (removable trims, buttons, and zippers), and recycled content percentage. By 2024, 34% of H&M products were assessed as "circular-ready" under the Circulator framework, up from 12% in 2021 (H&M Group, 2025).

In the Asia-Pacific sourcing base, circular design requirements have driven supplier-level changes. Tier 1 manufacturers in Bangladesh and Vietnam have invested in mono-material production lines that eliminate blended fabrics for specific product categories including basic t-shirts, underwear, and jersey dresses. These mono-material products command a 3 to 5% cost premium at the manufacturing stage but reduce downstream recycling costs by an estimated 40 to 60% compared to blended alternatives.

What's Not Working

Collection-to-Recycling Conversion Bottleneck

Despite collecting nearly 30,000 tonnes of textiles annually, only a fraction reaches fiber-to-fiber recycling. In 2024, approximately 7% of collected garments were recycled back into textile fibers, with the majority downcycled into industrial wiping cloths, insulation material, or mattress filling. The fundamental bottleneck is sorting: identifying fabric composition at the speed and cost required for industrial-scale recycling remains commercially unresolved.

Near-infrared (NIR) sorting technology can identify fiber composition at rates of 1 to 2 garments per second, but accuracy drops significantly for blended fabrics, dyed materials, and garments with multiple fabric panels. Sorting costs of EUR 200 to 400 per tonne represent 15 to 25% of the total cost of recycled fiber production, making sorted feedstock more expensive than virgin polyester or cotton in most market conditions (McKinsey, 2024).

Economic Viability Gap

Recycled polyester produced from post-consumer textiles costs $1,800 to $2,400 per tonne, compared to $900 to $1,200 per tonne for virgin polyester derived from petroleum. Recycled cotton fiber from chemical recycling costs $2,500 to $3,500 per tonne versus $1,600 to $2,200 per tonne for conventional cotton. This cost gap means that textile-to-textile recycling requires either brand-level premium pricing absorption, regulatory mandates for recycled content minimums, or carbon pricing that internalizes the environmental costs of virgin production.

H&M has absorbed the cost differential through its sustainability budget, allocating approximately $15 to $20 million annually to subsidize the price gap between recycled and virgin materials. However, this approach is not scalable across the full product range. Management has publicly acknowledged that achieving the company's target of 30% recycled materials by 2025 will require either significant reductions in recycling costs or regulatory frameworks that create a level playing field (H&M Group, 2025).

Regional Infrastructure Gaps in Asia-Pacific

Southeast Asia, where the majority of H&M's garment production occurs, lacks the waste management infrastructure to support closed-loop textile recycling at scale. Bangladesh generates approximately 400,000 tonnes of pre-consumer textile waste (factory cutting waste and defective production) annually, with less than 15% formally collected and recycled. Post-consumer textile collection in the country is virtually nonexistent outside of informal rag-picker networks.

H&M's attempts to establish reverse logistics for post-consumer garments in India and Southeast Asia have faced challenges including low consumer awareness of take-back programs, transportation costs that exceed the recovered material value for garments collected in rural or secondary city locations, and the absence of domestic recycling capacity for blended fabrics. The company's India program collected only 1,200 tonnes in 2024 across 52 stores, compared to 8,500 tonnes from 340 stores in Germany.

Key Players

Established companies: H&M Group (garment collection and circular design leader), Inditex/Zara (Closing the Loop program with 3,000+ collection points), Patagonia (Worn Wear resale and repair program), SOEX Group/I:CO (largest global textile sorting and recycling operator processing 400,000 tonnes annually), Lenzing Group (REFIBRA lyocell technology using cotton waste feedstock)

Startups: Renewcell/Circulose (chemical recycling of cotton textiles), Worn Again Technologies (polyester and cellulose separation and recycling), Infinited Fiber Company (cellulose carbamate technology for cotton-blend recycling), Circ (hydrothermal recycling of polycotton blends), Ambercycle (polyester-specific enzymatic recycling)

Investors: H&M Foundation (non-profit funding for recycling technology R&D), Breakthrough Energy Ventures (invested in multiple textile recycling startups), Circulate Capital (circular economy focused fund active in Asia-Pacific), Fashion for Good (innovation platform backed by major brands)

Action Checklist

• Audit current textile waste streams across operations and supply chain to quantify volumes by fiber composition and condition
• Establish garment collection infrastructure through retail locations with clear consumer communication and incentive mechanisms
• Partner with certified sorting operators to maximize reuse rates before channeling materials to recycling
• Integrate circularity criteria into design processes using tools that assess mono-material composition, durability, and recyclability
• Invest in or partner with chemical recycling technology providers to secure future recycled fiber supply at scale
• Map regulatory timelines for textile EPR, recycled content mandates, and digital product passport requirements in operating markets
• Set measurable targets for recycled content, collection rates, and fiber-to-fiber recycling percentages with annual public reporting
• Build supplier capacity in key sourcing countries for circular material handling, mono-material production, and waste segregation

FAQ

Q: What return on investment can fashion companies expect from textile circularity programs? A: Direct financial ROI from textile circularity remains negative for most companies at current scale and technology maturity. H&M's garment collection program generates approximately $40 to $60 million annually in recovered material value against program costs of $80 to $100 million, representing a net annual investment of $20 to $40 million. However, the strategic value includes regulatory risk mitigation (avoiding estimated EPR compliance costs of $50 to $100 million per year in the EU alone), brand equity contributions measured through consumer sentiment surveys showing 15 to 20 percentage point higher brand favorability among environmentally conscious consumers, and secured access to recycled material supply chains that will become mandatory inputs under anticipated regulations.

Q: How does Asia-Pacific textile circularity infrastructure compare to Europe? A: Europe leads substantially in textile collection and sorting infrastructure, with collection rates of 30 to 40% in Northern European countries versus 5 to 10% in most Asia-Pacific markets. However, Asia-Pacific holds advantages in manufacturing integration, with the potential to establish closed-loop systems where factory pre-consumer waste feeds directly into recycling without transcontinental transportation. Japan is the exception in Asia-Pacific, with a well-developed textile collection system achieving 25% collection rates and advanced sorting capabilities. China's textile recycling infrastructure is growing rapidly, with government targets for 25% textile recovery by 2030 under the circular economy action plan.

Q: What fiber compositions are commercially recyclable today? A: 100% cotton and 100% polyester garments are commercially recyclable using existing mechanical and chemical technologies. Mechanical cotton recycling produces shorter fibers suitable for blending at 20 to 30% with virgin cotton. Chemical polyester recycling via glycolysis or methanolysis produces recycled PET equivalent to virgin quality. Cotton-polyester blends, which represent the largest single fabric category at 35 to 40% of production, require separation technologies that remain at pilot or early commercial scale. Elastane-containing fabrics (present in an estimated 30% of garments) present the greatest recycling challenge, as even 2 to 5% elastane content contaminates recycling processes for both cotton and polyester streams.

Q: What are the key metrics investors should track in textile circularity programs? A: Priority metrics include collection volume growth rate and collection cost per kilogram, sorting accuracy and reuse-to-recycling ratio, fiber-to-fiber recycling percentage as opposed to downcycling, recycled content percentage in new products, cost gap between recycled and virgin materials (trending direction matters more than absolute level), and regulatory preparedness scores for upcoming EPR and recycled content mandates. Companies that report these metrics transparently signal operational maturity and strategic seriousness about circularity.

Sources

• H&M Group. (2025). Sustainability Disclosure 2024: Circular and Climate Positive. Stockholm: H&M Hennes & Mauritz AB.
• Textile Exchange. (2025). Preferred Fiber and Materials Market Report 2025. Lamesa, TX: Textile Exchange.
• Ellen MacArthur Foundation. (2025). Circular Fibres Initiative: Annual Update and Global Textile Waste Assessment. Cowes, UK: Ellen MacArthur Foundation.
• McKinsey & Company. (2024). Scaling Textile Recycling in Europe and Asia: Technology Roadmap and Cost Analysis. New York: McKinsey & Company.
• Hong Kong Research Institute of Textiles and Apparel. (2024). Green Machine Hydrothermal Recycling: Pilot Results and Commercialisation Pathway. Hong Kong: HKRITA.
• Global Fashion Agenda and McKinsey. (2024). Fashion on Climate: How the Fashion Industry Can Urgently Act to Reduce Its Greenhouse Gas Emissions. Copenhagen: GFA.
• European Commission. (2024). EU Strategy for Sustainable and Circular Textiles: Implementation Progress Report. Brussels: European Commission.