Reverse Resources
Fashion industry is in transition to circular economy, but recyclers can't access textile production waste with the background information they need to control costs. Recycling in Bangladesh is emerging, but the biggest market barrier is the informal trading system of waste. RR has built a win-win business case to motivate factories to segregate waste at source, demonstrate to traders how they can increase business through formal & transparent business processes, providing background information to recyclers, and statistics and overview to brands on how their production waste was circulated. This helps to formalise the waste trading in Bangladesh (as we've seen through pilot projects), and increase the value of the materials they are handling. Sorters now earn half of the minimum wage, but by becoming the formal part of the industry (audited and verified) and getting fair prices, we can reduce corruption and reach a fair wage paid to the sector.
Garment factories in Bangladesh generate around 400 000 tonnes of production waste or byproducts per year. A lot of local producers are taking care of fabric leftovers, but there is no recycling industry to manage smaller cutting scraps, contrary to e.g. India. The trading of textile waste from Bangladesh to other countries is complex and informal, controlled by mafia and creating barriers for change. With growing demand for recycled fabrics by large global fashion brands, and a significant number of recycling technologies entering the market, there is a huge opportunity for BD to become a smarter service provider of recycled products and prove growth of economy while using less natural resources. The market potential of turning waste to garments, instead of exporting as waste, is around 3 billion USD for Bangladesh.
There is little statistics on the trading sector, but we can estimate there are around 5-15 thousand small trading shops with 20-60 th people working in the sector (can be more). It's difficult to estimate, because normally waste goes through 4-5 middle-men and it gets re-sorted several times, creating a lot of unnecessary work. We don't expect to lose jobs, but upgrade the jobs from trading to recycling services.
We are working on a very systemic and complex problem, and through 5 years of research and trials have built a model that provides a win-win business case and has a clear potential to scale and create a disruption in the market. On one hand we work closely together with large global fashion brands to help them understand their role and influence and guide them towards right policy: demand statistics and waste flow transparency from factories and cooperate with other brands and recyclers in building scalable circular supply chains, instead of demand back waste for free, reduce factory margins and make the system resist change. On the other hand we have done a lot of ground-work and trials with factories, traders and recyclers in Bangladesh, Sri Lanka and India to have comparison of the systems and build a standardised solution that all could win from. Our approach has been to do co-innovation - letting factories and traders to build their own processes, learn from that and communicate that to others. We've continuously looked for ways to help speeding the process with digitalisation, but try to avoid killing the incentives by being too demanding as the level of digital literacy is low.
We are currently in the piloting phase, so the full solution is still under development. But initially we have gathered specifications from a number of recyclers in India, Spain, Sweden as well as input from traders and developed a standardised process for factories how to set up their segregation of waste at the cutting table, keeping waste separate by compositions, labelling it properly (creating a passport of waste). We are also conducting surveys with large fashion brands, mapping the general volumes and types of waste available from factories, and doing matchmaking with recyclers requests. We have also set up MOUs with few traders who then help us do the collection of the waste, organise it for the recyclers the way its needed and do the logistics. Brand's role is asking suppliers to start the segregation process for us. After setting up the supply chains we collect shipment information or monthly reports from the factories, the traders and recyclers about what was delivered and provide 360 degree feedback, evidence and verification to all four sides.
Currently the whole process is managed by email and excel sheets. We have our software platform (MVP-minimum viable product) which we are now mostly using ourselves to organise the work, replicate the process to demo the results and continuously learn what could be the good functionality of it. At the moment it's a simple online tool, but we are thinking of several ways how to make it more easy-to-use tool. One option for example is to build the information flows up with the EPCIS tracing standard, similar to how the bar-code system works. This would enable us to get standardised information from the ERP systems used by established factories. For traders who want to be involved, but don't use an ERP we have developed a simplified inventory tool, and one option would be to continue improving it by optimising it to smart-phone or some SMS service so that traders can help building the digital trace to the waste remotely. But these technical issues we will focus more once we have finalised the pilot, made the first shipments and secured cooperation interest with the stakeholders (we need another 2 months to complete the cycle).
- Accelerate economic growth and create high-paying jobs across geographies and demographics in Bangladesh, especially among marginalized populations and youth
- Reduce economic vulnerability and lower barriers to global participation and inclusion, including expanding access to information, internet, and digital literacy
- Manufacturing, Production, & Distribution
- Other
- Pilot
* We use business approach to demonstrate a market, but focusing on solving a systemic problem and creating impact and not on making business returns as primary goal, as normal businesses do. There have been numerous attempts to build waste marketplaces as a business, all have failed or aren't scaling (e.g. recyclematch.org, xstok.com, etc). Alibaba is there, but expects the interest from suppliers side to want to sell their materials, which is now missing.
* Traceability through supply chains of fashion has not been scalable. We however provide a business case to create benefits from traceability, not just building a "nice to have".
We've proven we need to go against two very common start-up rules:
(1) Our business case needs to be proven first on a large scale and then come down to smaller volumes as there is little money in one kg of waste that would give incentive for factories to start segregating.
(2) Instead of a 2-sided business case (I sell, you buy) we need to involve 5 stakeholders all at once to trigger the needed network effect.
Our innovation is about finding a way how to build a new market that functions in common interests in a situation where there is no public sector governance (across global supply chains). The most desired outcome from this is to be able to prove that the progress towards circular economy can be measured through material flows, and we can bring this into the attention of public sector to start driving it.
Activities:
* giving market insight to factories how to segregate waste to maximise value;
* matchmaking waste with recyclers' requests,
* inviting traders to formally participate in supply chains (collect, clean, bale, logistics) .
* collecting statistics and shipment documentation from all to prove the trace and verify accuracy.
Outputs:
* waste gets pre-segregated and properly labelled;
* background trace of waste made available to recyclers
* 360 degree feedback to all stakeholders (incl brands)
Short term outcome:
* Factory gets better price for segregated waste. Evidence from our BD trials: factory started earning 0.24 USD/kg instead of 0.02 USD/kg for their cotton waste.
* Traders get a business upgrade. Evidence: our BD trial showed that traders can't be skipped from the process as brands want to.
* Suppliers in BD start thinking of cooperation and new business opportunities in recycling space.
* Trust between stakeholders due to standardisation
Mid-term impact:
* Cost reduction for recyclers (less lab-testing once they start trusting the trace)
* Suppliers cooperate around building recycling plants.
* Brands understand the win-win value from transparency and start demanding segregation of waste by their suppliers.
Long-term impact:
* Total value of waste goes up as more waste finds higher value use. Evidence: some compositions can't be identified in manual sorting and get down-cycled due to that.
RR mission is to make sure that maximum amount of textile waste reaches the highest possible new value chain, so that less new resources are needed for textile production eventually.
- Very Poor
- Low-Income
- Bangladesh
- India
- Sri Lanka
- Cambodia
- Egypt
- Indonesia
- Pakistan
- Tunisia
- Bangladesh
- India
- Sri Lanka
- Cambodia
- Egypt
- Indonesia
- Pakistan
- Tunisia
Normally we measure KPIs by the number of facilities involved and waste volumes traced because it's difficult to link it with number of people and their personal-level impact. On personal level, people in trading sector will be affected the most because they are SMEs while the factories where waste is sourced from are large corporates. But large suppliers are constantly hiring people to include them in expanding work processes, and participating in circular economy will help to maintain business and jobs.
We currently work with 2 traders (~20 people), 6 factories (~6,000 people), 8 recyclers (participating in trials, no regular commitment yet) and 1 of the largest global brand (one-off projects, no regular commitment). We have traced 300 tonnes of waste to recycling helping to avoid ~5000 tonnes of CO2-eq and 100 million litres of water use.
In 1 year time we target 5 traders (~100 people ), 50 factories (~50,000 people), 4 recyclers (with regular commitment), 2 large brands (with regular commitment) to trace 2000 tonnes of waste to recycling per year, avoiding of 30 000 t of CO2-e and 650 million litres of water use.
In 5 years time we target 185 traders (~5000 people), 8000 factories (~8,000,000 people), 90 recyclers and 8 large brands to be able to trace 200 000 tonnes of waste, avoiding of 3.3 mln tonnes of CO2-eq and 66 trillion litres of water use.
Now that major brands have set goals to become 100% circular by 2030, supply chains need to adapt. 80% of exports of BD depend on garment production, involving 3.6 million workers. Only a small number of global brands represent the majority of the demand, and their goals towards circularity affects the sector strongly. BD needs to adapt to this market need efficiently, and overcome market barriers like lack of collaboration (due to hyper-competition) and informal waste trading. RR goal is not fully aiming to help only BD (we work the same in other countries), but BD market has been the low-hanging fruit for us to demonstrate our value, and we have reached furthest in proving the concept there, giving factories and traders in BD a sort of first-movers advantage to build efficient circular supply chains (we've verified the same problem in several other markets).
Our goal with the next year is to demonstrate that our solution is quickly scalable and can in fact solve the problem for large brands, maintaining their supply from BD and proving step-by-step shift to circular economy. Within the next year we don't expect the recycling industry in BD to increase significantly, and the trace would show waste flows exported. But over 5 years time the goal is to provide statistical evidence that the country indeed is increasing its GDP from upgrading the value of waste flows internally, and reducing the volume of new virgin materials used, which they can use as a strong marketing message.
1) The highly conservative mindset of textile industry. Fashion is still one of the most polluting industry sectors globally because no solutions can be properly scalable without large brands pushing it. Due to hyper-competition is the norm in the industry to operate under heavy NDAs and keep high secrecy levels. That applies both on global brand level as well as local level among factories and local buying houses etc. The informal trading of textile waste has even higher level of secrecy and mistrust, due to being in conflict also with public sector. Circular economy needs collaboration and joint efforts. Although a challenge, it also is the reason why our solution is valuable. The very start of it is challenging due to the chicken-and-egg situation.
2) Systemic problem crossing country boundaries. There is no public authority to govern across global supply chains, but building circular economy needs global collaboration and public push.
3) Lack of financing to systemic solutions . As our topic falls into no-mans-land there is also no funding available, specially from VC community. Investors in Europe aren't aware of the situation in Asia, there are no VC funds available in BD, pilots in BD aren't appealing for investors in India, etc. Same chicken-and-egg problem with financing.
4) Low digital literacy. A well-designed software solution would solve many of the problems rather quickly, but in addition to proving that circular economy can be economically beneficial, we also spend a lot of time building trust in software solutions and data security on rather basic level.
1) The highly conservative mindset of textile industry.
Step-by-step we have been able to showcase the win-win business case from data sharing. We are fully not there yet. But brands themselves are moving towards greater collaboration (e.g. Fashion For Good) to build circularity. And the informal trading in BD - we have examples where factories have fought back agains the system, showing that buyers demand transparency. We've organised meetings between suppliers to share experiences. We've designed viral spread into the solution, keeping this problem in mind.
2) Problem crossing country boundaries. Our solution really is benefitting factories, collectors and recyclers the most, but we work closely with large brands who in countries like BD represent a bigger public push in some ways than local policy would. We don't have leverage over large brands themselves, but we work hard on proving their benefits. Their publicly announced goals towards circular economy are now leading their actions.
3) Lack of financing to systemic solutions . Instead of investors, we've been funding our project from grants and awards and are dependent on this till we've build the market which then enables us to scale the solution and earn our revenues.
4) Low digital literacy. We've reduced the use of software to minimum till we can demonstrate the value from data sharing, and build trust in software through building trust in RR company first. We design the technical solution around the readiness of using software, developing tools for internal processes and have personalised UI for clients.
- My solution is already being implemented in Bangladesh
RR has two team members based in Bangladesh. Over 4 years we have conducted several trials with factories, traders and recyclers in Bangladesh to map the situation, analyse incentives, and develop a best practice process for improved waste management, reuse and recycling of waste. We've managed to bypassing several challenges and demonstrate the win-win business case bit by bit. We are currently working with 3 major supplier groups, two waste collectors/traders and one recycler, with a huge network of further potential partners. We also have a project running with one of the largest global fashion brands and a next pilot with them starting to invite their supplier participate in our solution, which has the potential to lead to scaling of the approach. We have good contact with BGMEA and Control Union in BD, who have given their consent, but no active partnership started yet, as all are waiting for the results of our pilots, and us being able to call out publicly our partnership with first large brand.
- Hybrid of for-profit and nonprofit
We are legally registered as for-profit organisation, but for 5 years we have been doing research and involved in innovation projects. We've been asked by many mentors why have we not registered as a foundation. Answer is that we intend to prove the business case of circular economy. However, the motivation of the founders is not doing it for profits, and we've discussed reinvesting the revenues into circular economy. There is no legal format of officially registering a social enterprise in Estonia, otherwise this is what we would be.
We have 8 team members working full time, and one working part-time. Not all are under employment contract because the team is split across 5 countries (team members in Estonia, Bangladesh, Spain, Netherlands and Poland) and it's sometimes easier to organise the work with invoicing, instead of employment contracts. We have employment contract with 4 people. Nevertheless, all 8 members of the team work full time with full responsibility for their line of work. The one working with part-time is involved like a consultant.
The core team of 4 people has already worked together for 4 years, and proven a great teamwork. Our team brings together expertise and personal level skills with a great variety and balance. We have 10+ work experience in textile industry, circular economy, software development, agile project management, software service design & product development, sales & marketing, lobbying, internal sustainability efforts of large global textile/fashion brands, Bangladesh business culture, and and a lot else covered. On personal level we have a good balance of visionary, strategic, action oriented and efficiency development skills. We've also gone through 5 different accelerator programmes, and built a very strong mentor support network.
Fashion For Good: we participated in the accelerator programme in 2018, and received funding from them. Since then FFG has promoted us at events, invited us to present our solution. We're keeping a discussion on potential collaboration projects, but so far none of the pilot projects have become a reality for different reasons.
H&M Foundation: since winning the Global Change Award we're in their alumni programme. Twice a year they organise events promoting our progress and introducing us to strategic partners of H&M.
Levi’s Collaboratory: they funded publishing our white paper to be completed by early 2020. Levi’s also gave confirmation to one of their suppliers to allow tracing Levi’s waste through our networks and showcase the background trace of their waste getting recycled. We'll have a chance to go deeper into the conversations after publishing our pilot findings.
Control Union: we’ve had a series of discussions with their management both in Asia and Europe. They've shared a lot of valuable insight with us, and made several introductions (incl. Textile Exchange) to investigate the value added from our system to GRS.
Garment factories: We provide guidance on how to segregate waste to maximise earnings from it. We collect statistics & provide feedback that helps with reporting to HIGG index and their buyers. Factories in Bangladesh have started to earn 10 times higher price (from 0.02 USD/kg to 0.24 USD/kg).
Recyclers: We collect their specifications, offer matchmaking with our waste database & provide background information about the origin and content of waste. This gives control and lower lead times of their feedstock, and reduce need for lab-testing of waste (recyclers are now spending 0.1 USD/kg on testing).
Textile waste collectors/traders: We provide assistance and tools to build a digital trace for the waste from source to be properly labelled and organised. They can sell the waste with higher price and find buyers for more waste.
Large global fashion brands, HQs of large supplier groups or buying houses: We provide statistics and measure KPIs on how much of their production waste reached which recycling and how much environmental impact was avoided. Traceability is not any more a nice-to-have solution to invest in, but a side-value from a solution that is needed for the supply chain. Biggest value for them is using the statistics and proof of circularity in their marketing.
RR uses different revenue schemes:
Consultation fees from brands and supplier group HQs to turn some of our sales & marketing cost into a positive cashflow, and if possible also fund our software development until we can't involve investors.
Subscription fees from background trace to recyclers, statistics and market insights to brands and supplier groups, and proof of circularity to factories. We provide waste volume reports, circularity report (proof of recycling), recycling impact report (CO2, energy, water savings) & market overview reports.
We've seen that due to the very small money in waste, our solution is only scalable if we keep the prices very low and fully rely on the fast scalability and viral spread of the solution. The numbers work for us: working with 5 large brands would give us access to 5000+ factories who generate over 800 000 tonnes of waste & by-products per year. With maximum reuse and recycling this could be turned into 2 billion new garments or products, with 5 billion USD market value. Our goal is to capture 25% of these material flows and 3% of that beachhead market value to create enough value return for our investors. If we do not find VC funding, we could potentially scale slower or charge lower, but our primary goal is to create as big impact as possible, so we adapt our strategy by the best possible scalability option.
Tiger IT Foundation can provide valuable support for us by offering:
* Mentorship within the local context in Bangladesh - RR has two team members in Dhaka who have not participated in any accelerator programmes we've been to in Europe or US. Rest of team in Europe does not have enough insight to guide their actions in Bangladesh enough considering the local work culture and political structures.
* Office space. We've seen quite a number of cases where deals are pending bevause we can't show us being properly established in Dhaka as we don't have office space and our team is working from home. That would increase our credibility enormously.
* Support with establishing an official branch for RR in Bangladesh to run our operations also officially in Asia.
* Support with IP efforts. Bangladesh is not covered with international trademark protection, and we haven't yet done the analysis how to protect our brand (no other production possible). We've seen cases were international trademarks are replicated in the country and there is no protection for us right now, so we'd need to start the process.
* Funding. Stichting DOEN from Netherlands was ready to become our lead investor if we find a co-investor. We've gone through 100+ investors, but without monthly recurring revenues yet they don't know how to assess the risks. We had 3 interested investors eventually, and all dropped for different reasons. We've might need to depend on natural growth, which keeps us from scaling and getting to impacts fast enough.
- Distribution
- Legal
- Monitoring and evaluation
- Media and speaking opportunities
- Other
As our project also has benefits for public sector, we are looking for opportunities to have a proper discussion started with the public authorities in Bangladesh.
Our best partner would be BGMEA. Although we have met once with Rubana Huq and had a discussion with few of the directors, their position was that we need to first build cooperation with a large buyer before they'd support our cause. However, the project should be much more in the interest of the local audience to create joint protection agains brands to claim ownership of their waste and result in factories losing the extra margin they now earn for their waste. We haven't had a chance to make ourselves heard enough to explain the economics and the patterns of the shift in the industry caused by circular economy. Maybe they know this, and choose not to work with us for other reasons, but we believe we have quite a lot to offer to help the cause. A good partnership in Bangladesh needs building trust and getting support from others to become properly heard.