Syntax Literate: Jurnal Ilmiah
Indonesia p–ISSN: 2541-0849 e-ISSN: 2548-1398
Vol.
9, No. 3 Maret 2024
CIRCULAR BUSINESS MODEL STRATEGY OF SMM
FASHION BRAND: THE IMPACT TOWARDS SDG GOALS
Fatimah
Azzahra1, Cyntia Keliat2
LPSR, Jakarta, DKI
Jakarta, Indonesia1,2
Email:
[email protected]1, [email protected]2
The linear system known as
“Take-Make-Waste'' has positioned fashion and textile industry as the second
largest waste contributor in the world after the oil and gas industry.
Consequently, the disruptions we currently face have led us to the global
textile waste crisis era, including Indonesia. On the other side, Ellen
MacArthur Foundation observes an increase in market and business opportunities
within the slow/circular fashion industry. This research aims to explore the
business strategies of the Indonesian fashion brand, SMM, which has been
committed to implementing responsible fashion practices since 2014 and actively
addressing environmental impacts. Through value hill analysis as the research
framework to identify current circular activities, gaps, and challenges faced
by SMM, the analysis focuses on three stages: uphill, tophill, and downhill.
This qualitative research employs semi-structured interview techniques, primary
and secondary data observation to comprehensively understand the adopted
circular business model. The research findings indicate that SMM utilizes
Circular Supply Models as its primary business model, Resource & Recovery
Models as an effort towards using 100% new materials, and Product Life
Extension Models as a form of loyalty to its customers. These circular business
model strategies have helped SMM reduce carbon emissions by nearly 20% of the
total emitted. This indicates that SMM is a manufacturer promoting responsible
consumption and production.
Keywords: Circular
Business Model, Circular Fashion, SDG, Responsible Consumption & Production
Introduction
The
textile industry is spread globally, generating around 1.7 trillion dollars (Smith, 2023) and employs
around 60 million workers around the world (Van der Linden, 2019). Despite
its significant part as the seventh largest economy in the world (Burkacky et al., 2022), the fashion and
textile industry comes with consequences which is nominated as one of the
biggest global polluters.
For
more than years, the linear system known as “Take-Make-Waste” in the textile
and fashion industry has resulted in numerous disruptions which have led us to
the global textile waste crisis era. The European Environment Agency reported
that it is causing 270 kg of CO2 emissions from textile purchases per person in
2020. Moreover, the sector is responsible for the second-greatest annual
quantity of hazardous ocean microfiber pollution, which is the same amount of
50 billion tons of plastic bottles (Goyeneche et al., 2018). The fashion
sector is believed to contribute to 20% of worldwide pollution in clean water
resources. Notably, textile dyeing and finishing mills are substantial water
consumers, utilizing a minimum of 200 tons of water per metric ton of produced
textile (Muthu et al., 2014). Additionally,
the textile sector is playing a role as the third significant factor in the
degradation of water and the occupation of land (Mikhaylov et al., 2020).
Despite
this, on the global level the textile waste crisis is also happening in other
developing countries, including Indonesia. Indonesia is in the world’s top 10
textile and apparel production (Ishaque et al., 2019). Unfortunately,
this has made Indonesia as the second-highest water pollution contributor
(29.25%) arising from the textile sector among the more industrialized G20
members (Paraschiv et al., 2015). According to the
SIPSN KLHK 2021, the amount of textile waste in Indonesia reached approximately
2.3 million tons, equivalent to 12% of the total household waste and only 0,3
million tons of this waste can be recycled (Safitri & Pratama, 2022).
Citarum
River is one of the most dangerous rivers in Indonesia impacted by the textile
industry. A decade ago, the World Bank designated Citarum as the world's most
polluted river—a characterization embraced by both the media and environmental
advocates. Despite this, approximately 30 million people depend on this
contaminated water for activities such as irrigation, washing, and even
drinking, posing potential health risks (Sagita, 2018).
The
impact is rising cruelly because the entire industry’s value chain aspects
could lead to environmental damage (Niinimäki & Durrani, 2020). If nothing
changes, globally there will be at least 102 million tons of global clothing
waste and the situation will only get worse (Kıvrak et al., 2017). Considering the
consequences of the above destructive outcomes due to the irresponsible textile
production, addressing the issue has to be an essential for multi-dimensional
stakeholders.
Back
in 2015, global leaders including Indonesia, collectively committed to
Sustainable Development Goals (SDGs). According to the SDG Index 2020,
Indonesia has achieved high rankings in the following three Sustainable
Development Goals (SDGs): SDG 4, SDG 12, and SDG 13. Therefore, refining
Indonesia’s responsibility in terms of industry production may contribute to
not only environmental health impact but also the success of the SDG goals.
At
the same time, there is still a shortage of research dedicated to sustainable
textiles and fashion, especially in developing countries like Indonesia (Boström & Micheletti, 2016; Hassini et al., 2012). To address the
gap, the research of this study will be conducted on Indonesia’s fashion brand
study case with the aim to discover new perspectives that may give some
practical implications for other fashion players. The research also proposed to
present valuable insight in mitigating the negative environmental impact.
SMM
is one of the fashion brands established in 2014. The brand has a strong
commitment to empower slow and circular fashion principles and their commitment
to sustainability. The founder is aiming to support a circular economy and help
protect the environment by repurposing the fashion activity.
Thus,
to explore SMM’s business model and strategy this given research this research
aims to explore the business strategies of the Indonesian fashion brand, SMM,
which has been committed to implementing responsible fashion practices since
2014 and actively addressing environmental impacts.
It
is also important to note that there may be some limitations in this study. The
research is only limited to Indonesia's fashion brands and only observing
industry’s business strategy around internal circles without giving any
judgement to external parties such as government and government policies as
nation’s decision holders. Further, the findings may need future exploration
and research to enrich the quality and context of current study.
The
research adopts a qualitative research approach involving descriptive analysis
through two distinct data collection resources both primary and secondary
sources (Hidayat et al., 2022). Therefore, the
data collection techniques consisted of data observation, in depth interview,
and documentation (Hidayat et al., 2023). The qualitative
methods objective is to grasp and appreciate the contextual influences that
shape the research topics (Hennink et al., 2020).
The
primary data will be generated by in-depth interview and SMM 2023
sustainability report to uncover primary findings that hold broader relevance
beyond the rapid barrier of the study while the secondary data is collected by
some published research by other authors that is leveraged to fulfil the
research objectives. The in-depth interviews will be employed to gain a
comprehensive understanding of the participant's viewpoint regarding the
research subject (Rosenthal, 2016).
The
interview media channel was conducted in a virtual platform in a
semi-structured interview. The interviews run professionally by offering a list
of questions that has to be proved first before the interview process.
Moreover, the instrument of data collection involves the use of transcriptions
and notes made by the interviewer regarding the interview's content,
participants, and context.
Figure 1.
Circular Value Hill Tools
From
European Commission, 2020
SMM
directs its focus towards controlling and achieving circularity throughout the
entire production process, particularly emphasizing responsibility, right from
the strat (uphill phase).
Beginning
with the design processes that are both environmentally friendly and conducive
to circularity, SMM avoids following trends and opts for limited production
quantities. Moreover, during the production phase, SMM utilizes materials that
are responsibly processed and biodegradable. The company also employs
production processes that are both traditional and innovative methods, aiming
for minimal environmental impact, energy efficiency, and water conservation. In
the distribution phase, each SMM product is packaged using reusable &
recyclable materials.
SMM's
commitment to circular fashion goes beyond upstream activities; it also seeks
to enhance product productivity (tophill phase) by extending its lifespan. SMM
provides repair services to customers, as a way to reduce textile waste while
increasing brand loyalty.
In
the post-use or product recovery phase (downhill phase), SMM implements
upcycling and recycling practices. Upcycling involves repurposing unused
materials into new products such as the Daur collection and various SMM fashion
accessories. In managing unusable clothing waste, SMM applies recycling
practices to convert it back into raw materials, aiming to reduce the
consumption of entirely new materials, and collaborates with various partners.
Overall,
this concept of circularity has been woven into SMM's product design
collections, known as Baru (first life - new), Daur (second life - upcycle),
and Baur (third life - recycle).
SMM Circular
Network Support
The
SMM brand is engaged in collaborations with more than 200 artisans, Small and
Medium-sized Enterprises (SMEs), as well as various partners such as PABLE
Indonesia, EcoTouch, and artisans specializing in hand-drawn batik, stamped
batik, and digital printing using OEKO TEX STANDARD 100 and OEKO TEX ECO
PASSPORT certified dyes.
These
collaborations cover various production aspects, from sourcing raw materials to
waste management. Collaborations with local artisans involve the production of
various fabric types, including hand-drawn batik and stamped batik, as well as
digital printing artisans using certified dyes. Additionally, partnering with
EcoTouch showcases SMM's commitment to managing textile waste more responsibly.
Moreover, partnering with Instalasi Pengolahan Air Limbah Terpadu highlights
SMM's efforts to mitigate the negative environmental impact of its production
by ensuring efficient and eco-friendly wastewater management.
SMM
is a fashion brand committed to ushering in a more environmentally responsible
future for the fashion industry. This commitment is rooted in five core pillars
that underpin SMM's approach: Circular Economy, Transparency and Traceability,
Ethical Supply Chain, Giving Back, and Climate Action. In essence, SMM's business
model focuses on reducing environmental impact by embracing principles of
circularity.
Following
a Value Hill analysis, SMM emerged as a fashion brand dedicated to circular
fashion. Addressing the research question of how SMM applies the circular business
model to achieve sustainable fashion and meet responsible consumption and
production goals, SMM adopts three of the circular business models outlined by
Lacy & Ruqvist: circular supply models, product life extension models, and
resource recovery models.
This
commitment is evident in SMM's strategy to ensure that every stage of
production, leftover materials, and unused clothing waste can be reused,
repaired, and ultimately recycled.
Circular supply
models
This circular business model implements
the concepts of longevity and durability. In this model, businesses ensure that
the products they create are made from high-quality materials and through
innovative and safe manufacturing processes. In other words, the circular
supply chain model offers a comprehensive concept of circular economy where
products are recyclable or biodegradable, replacing the linear economic
concept.
SMM applies the circular supply model
concept from design, preparation, raw material processing to production. Below
is the table of the circular supply chain model from the SMM clothing label:
Table 1.
Circular supply models
Circular
Supply Model |
||
Activity |
SMM
Circular Strategy |
Linear
Strategy |
Design |
Responsible
design -
Apparels: Kids, women, and mens wear -
Fashion accessories: Shawls,
Bandana,bags & purses, headband, footwear, etc -
Home & Decoration |
Fast
fashion & unlimited |
Material |
Raw
Material (100% organic): -
Kapas organik -
Linen & rami -
Hemp -
Tencel -
non-poliester Natural
& Certified Dyes: -
OEKO-TEX standard 100 -
OEKO-TEX ECO PASSPORT Packaging: -
bio-Cassava bag -
Paper bag -
Reusable pouch |
Polyester
Materials |
Production |
Responsible
& Innovative Process: -
Traditional process: Local artisans for
any kind of batik, tenun ikat, sablon tangan -
Upcycle: patchwork technique -
Digital printing: certified dyes |
Massive
production |
Revenue
model |
Direct
Selling & Retail -
Official Website -
Official eCommerce Platform -
Pop-up store |
Direct
& Non-direct selling: Distributor, reseller, massive selling |
Product life
extension models
This circular business model is a circular
strategy aimed at extending the lifespan of products in various ways. According
to Ibrahim (2021), this model
consists of six approaches: build to last, refurbish, take-back/trade-in,
upgrade, refill, and repair.
The primary objective of this business model
is to help customers find value in a product for as long as possible. In the
other words, the product life extension model is one of the circular models
aimed at maximizing product’s value while optimizing profitability throughout
its lifecycle.
SMM provides repair services for damaged
products to its customers. The repair process is tailored to the type of
product damage. This service serves as SMM's brand loyalty initiative to
enhance customer satisfaction. However, this model does not serve as the primary
business model for SMM, as the company ensures that the products it creates are
inherently durable and long-lasting.
Resource and
recovery models
The Resource & Recovery business model
concept aims to optimize resource utilization and reclaim the value of products
that are no longer in use. Unlike traditional recycling models, this circular
business approach perceives waste not as an external issue requiring
intervention from third parties or waste management entities, but rather as an
integral resource fully integrated into the business framework. This
integration facilitates processing and the creation of additional revenue
streams.
SMM applies the principles of upcycling
and recycling to transform unused products into new ones with added value or
even as resources, thereby striving to reduce the consumption of entirely
(100%) new materials. Presented below is a table illustrating SMM's circular
strategies for managing fabric scraps and clothing waste.
Table 2.
Circular supply models
Resource and recovery models |
||
Activity |
SMM
Circular Strategy |
Linear
Strategy |
Upcycling |
-
DAUR Collection Utilizing pre-consumer waste, namely Sisa
Kain Perca or rejected fabrics, to transform them into new value-added
products. |
Unwanted
item, waste to landfill |
Recycling |
-
BAUR Collection Initiating
a program to collect used clothing that is no longer wearable (post-consumer
waste) to be recycled into new textiles. |
Unwanted
item, Waste to landfill |
The resource & recovery model is an
integral part of the circular approach in business, where waste is considered a
valuable resource that can be managed and utilized as efficiently as possible
to reduce environmental impact and enhance resource efficiency.
Gap
and Opportunity in Fashion Circularity
The SMM brand recognizes the increasing
trend towards sustainable practices in the fashion industry. Many designers and
fashion brands are starting to study and implement sustainable principles and
circularity in their production processes. Moreover, there is a growing number
of public figures or communities embracing slow fashion/circular fashion, which
influences consumer purchasing decisions.
Furthermore, consumer awareness regarding
the environmental impact of the fashion industry is on the rise. However, this
awareness is predominantly prevalent among younger demographics such as
millennials and Gen Z, while older generations still lack knowledge and
interest in this regard.
Meanwhile, a gap arises as circular
fashion products remain inaccessible to all segments of society due to their
relatively high prices. This is attributed to high raw material costs,
production processes requiring lower-impact investments, and fair wages and
facilities for the local partners. Additionally, the lack of infrastructure
supporting circular fashion practices in Indonesia poses a challenge,
potentially exacerbating production costs.
SMM
Impacts towards SDG 12
SMM's
commitment to responsible fashion practices, as executed through various
initiatives in accordance with SMM's Responsible Supplier Guidelines, has
successfully reduced carbon emissions by a total of approximately 307,000
kilograms of CO2 per year, equivalent to 19.7% of the total emissions generated
by all SMM activities, reaching 1.5 million kilograms of CO2 per year.
In
the recycling program conducted from 2021 to 2023, it managed to collect as
much as 5.7 tons of unusable clothing. More than 2.4 tons of this were
successfully processed into new resources, such as yarn and insulation
material. This program succeeded in saving as much as 6 million liters of water
per year and reducing emissions by 60,000 kilograms of CO2 per year.
Furthermore,
the upcycling program also yielded positive impacts, with sales of over 12,000
SMM DAUR Collection items since 2019. This has resulted in the DAUR Collection
saving more than 31 million liters of water per year and reducing carbon
emissions by more than 6,500 kilograms of CO2 per year.
Through
an analysis that has been carried out based on data collection methods of SMM's
circular business strategies and using the value hill framework to analyze its
business concept, it can be concluded that the implementation of Circular
Supply Models, Resource & Recovery Models, and Product Life Extension
Models has answered to the problems that arise in the object of research. The
impact of all various SMM strategies aligns with Sustainable Development Goal
(SDG) number 12 the responsible consumption and production practices, subpoint
(12.5), which aims to reduce waste generation through prevention, reduction,
recycling, and reuse. The five business models are a great option as a guiding
framework when exploring how to transform resource use and value propositions
to capitalise on elimination of waste. Hence, other fashion and textile player
brands can take advantage or take the opportunity to leverage this circular
fashion practice, either partially or fully, similar to the approach adopted by
SMM. The research has identified the basis initial action for fashion industry
before execute circular strategy: (1) identify the resource and opportunity
that business has, (2) reassess what value business want to delivery to customer,
and (3) start with small circular action and focus to improve it. As
transforming toward a circular concept will take time and effort, it is
important to remember that collaboration among fashion players, industry
stakeholders, and government as well as the consumers behaviour-change is
essential to drive the development and successful upscaling of circular
business models. It took almost 10 years for SMM brand (since 2014) to
establish a responsible and resilient circular fashion ecosystem that required
more than 200 diverse local collaborations.
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Copyright
holder: Fatimah Azzahra, Cyntia Keliat (2024) |
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