Why circular fashion doesn’t always mean less environmental impact

Today’s textile industry is largely linear. According to Circle Economy’s Circularity Gap Report Textiles, it uses 3.25 billion tonnes of materials every year, with the vast majority—over 99 percent—coming from virgin sources. What’s more, the rise of fast fashion has intensified textile consumption cycles, encouraging consumers to buy and discard clothing at an increasingly rapid pace.

Circular strategies like reuse, repair, rental, and upcycling are presented as key solutions to reduce the textile industry’s environmental impact. In many cases, they do deliver reductions, with work by the European Recycling Industries’ Confederation indicating potential savings of up to three kilograms of CO2e per reused item. However, these benefits are not a given. They depend on whether these circular strategies actually replace new garment purchases. This is where the concept of displacement rate comes in. It describes the extent to which reusing, repairing, renting, or upcycling clothes will prevent the purchase of a new item.

Without accounting for displacement rates, it is easy to overstate the environmental benefits of circular fashion, leading to unrealistic expectations among consumers, policymakers, and industry actors. And when expectations are too high, the actual result can lead to disappointment—or, worse, scepticism and waning support for circular textile solutions.

What is the displacement rate?

The displacement rate is a metric that measures the extent to which a circular action replaces a new purchase. A 100 percent displacement rate means the action fully avoids a new purchase, though this rarely happens. In practice, a high displacement suggests that circular consumption is substituting for new purchases, while a low displacement indicates that circular consumption merely adds to existing consumption.

Displacement depends on how people engage with each circular strategy. For instance, second-hand items may replace new purchases, but they may also be bought impulsively or in quantities rivalling those of fast fashion. Repair can extend a garment's life and delay replacement, but only if the item is actually worn. A stitched dress with sentimental value gathering dust on the shelf, thus does not count. Purchase decisions depend on many overlapping factors (such as price, quality, or need for the garment), so understanding exactly why someone buys more or less is challenging.

As a result, the displacement rate is difficult to measure. It rests on assumptions about how people behave rather than direct measurement. Researchers currently estimate displacement rates using surveys and behavioural data across consumer groups, rather than looking at individual purchasing decisions. Several businesses and platforms, including Vinted, Vestiaire Collective, and Depop, have conducted research to estimate displacement rates among their own customers, and environmental NGO WRAP has developed a standardised methodology to help organisations assess and compare their displacement rates more consistently across the industry.

Displacement across circular textile strategies

Circular textile strategies affect purchasing in different ways. WRAP’s Displacement Rates Untangled report finds that around four in five clothing repairs displace a new purchase, equivalent to an 82.2 percent displacement rate. The same WRAP research, conducted across peer-to-peer resale platforms including Vestiaire Collective, eBay and Depop, estimates that around three in five resale purchases displace a new item or 64.6 percent. By contrast, Vinted’s own consumer research reports a lower displacement rate of 40 percent, illustrating how results vary depending on methodology, platform, and user base.

Insights are more limited when it comes to rental and upcycling. In theory, rentals can displace new purchases, particularly for garments worn only occasionally, such as wedding dresses. Nevertheless, it might also reinforce a desire for new clothes. Upcycled clothing does sometimes displace the purchase of a brand-new item. However, some materials may be lost during the upcycling process, and adding new components, such as zippers, might be required. In both cases, these factors make it harder to translate impacts into clear behavioural assumptions.

Why is the displacement rate important in environmental impact assessments?

Factoring in the displacement rate is crucial to assessing the environmental benefits of circular textiles solutions. Without it, circular strategies risk becoming additive rather than substitutive. This means consumers still buy the same amount of clothing, or even more. And if demand for new garments remains as before, the associated impacts—such as virgin material extraction and production emissions—also remain high. This is why the displacement rate is one of the most important aspects of an environmental impact assessment. Displacement rates quantify how much consumer behaviour actually contributes to avoided production, helping us understand how effective circular textile solutions are.

How does the displacement rate drive real decisions?

As part of the EU Horizon project SOLSTICE, Circle Economy conducted a prospective environmental impact assessment, aiming to estimate the potential environmental benefits of circular textiles pilot projects in Berlin, Prato, Grenoble, and Catalonia. Within this work, Circle Economy modelled a range of environmental indicators, including water use, energy demand and land use, to understand how different circular interventions might perform under real-world conditions.

A central assumption in Circle Economy’s modelling was the displacement rate, estimated at between 40 percent and 80 percent across the different pilots. These pilots included interventions such as a repair bonus scheme, dedicated spaces for circular textile activities and a digital application encouraging the use of multiple circular services. In practice, this means that between 40 percent and 80 percent of textiles repaired, swapped or collected for reuse are assumed to replace the purchase of a new garment.

From this perspective, circular strategies can deliver meaningful reductions across a range of environmental impacts when displacement is sufficiently high. These estimates can then be used by local authorities in a myriad of ways: to drive decisions on which pilots deserve further funding, advocate for circular policies, design transition roadmaps, and more.

What is the rebound effect?

Another concept that frequently surfaces in discussions about consumer behaviour is the rebound effect. While the displacement rate estimates how much virgin production is avoided through circular activities, the rebound effect looks at the unintended negative impacts that can result from circular solutions. For example, second-hand products are usually cheaper, which might tempt consumers to buy more items than they initially planned. Or they can use the money saved to treat themselves to something else. These kinds of behavioural responses are part of the rebound effect.

Psychological factors play a role here. Buying second-hand may feel more guilt-free than buying new, creating a sense of moral licensing when people feel that they are taking part in ‘sustainable’ behaviours. Research by Poldner and Siderius shows that these behavioural dynamics can weaken the expected environmental benefits of circular models. This is why rebound effects matter: like displacement rates, they show that circularity does not automatically translate into lower environmental pressure.

What does displacement really tell us?

Ultimately, circular textile solutions can only lead to better environmental impacts if they are paired with an overall reduction in textile consumption. Every strategy can have a positive impact, but the displacement rate highlights that the most impactful strategies are those that steer consumers towards fewer purchases.

Displacement, therefore, offers a more realistic lens for assessing circular fashion. It reveals a simple but critical truth: circular fashion is not automatically sustainable—its environmental benefit depends on what it replaces. Understanding this distinction is essential for accurately measuring impact and designing interventions that deliver real reductions in environmental pressure.