How Kappahl is leading the change toward circular fashion

Sustainability is no longer a trend in the fashion industry, it’s a necessity. Under the guidance of Sandra Roos, Vice President Sustainability, Kappahl is leading the change, upscaling circular business models to meet new EU regulations and changing consumer demands. Discover how the retailer sets a new standard for sustainable fashion by embracing secondhand, utilizing transparency tools such as the Higg Index and TrusTrace, and staying on top of legal requirements.

Sandra Roos, Vice President Sustainability, and her team at Kappahl are dedicated to making scalable digital solutions for circular business models within fashion a reality. As the industry faces increasing legislative demands from the EU and changing consumer expectations, achieving scalability in sustainable practices has never been more critical.

The challenge lies in providing a consistent shopping experience, whether purchasing new, secondhand, or repaired items—online and in-store. The fashion industry has been at the forefront of sustainability for a long time, driven by intense media scrutiny over the past decade, now turning into strict regulations and consumer demand. However, the challenge remains: how can scalable business models be effectively implemented? And how can retailers comply with upcoming regulations from the EU, such as Digital Product Passports (DPPs)? Learn from Kappahl, a fashion retailer at the forefront of sustainable fashion.

Kappahl's commitment to a responsible fashion industry

Founded in 1953, Kappahl Group is a leading Nordic fashion retailer, including its brands Kappahl and Newbie. The company has more than 330 stores in Sweden, Norway, Finland, Poland, and the UK - with an online presence in more than 20 countries.

Kappahl is committed to creating a responsible fashion world. This ambition is central to its strategic vision, which emphasizes the importance of scalability. The retailer has made significant efforts in sustainability, setting science-based targets and utilizing traceability tools large-scale. With a return rate of 16%, and only 3% of returns going back to the distribution center, Kappahl efficiently manages unsold products through sales and discounts.

Thanks to biofuel-powered ships, transport from Asia (India, China, and Bangladesh) accounts for only 0.6% of Kappahl’s total emissions. The retailer refuses to transport products via air freight, even if the supplier is willing to pay. However, the major emission sources are in dyeing and weaving processes.

Read on to learn about the tools and best practices the retailer utilizes to become an industry leader sustainably.

“Thanks to biofuel-powered ships, transport from Asia accounts for only 0.6% of Kappahl’s total emissions. The retailer refuses to transport products via air freight, even if the supplier is willing to pay.”

1. Embracing secondhand  

A significant portion of Kappahl’s future sales is targeted to come from the secondhand market, which is expected to grow substantially. By 2026, Kappahl aims for 50% of its assortment to be enabled for circular offers. The initiative reflects Kappahl’s commitment to sustainability and its proactive approach to upcoming regulatory changes. For example, garments will from January 2025 no longer be discarded in general waste; in Sweden, the municipalities will oversee separate collection for about two years until the EU Extended Producer Responsibility enters into force.

Kappahl's strategy includes capturing market share in both new and secondhand markets. Full traceability from fiber to garment and an assortment with high quality and timeless design ensuring long product lifespans.

- We are committed to circular business models. By selling a product twice, we can significantly reduce the number of garments we need to produce, getting one step closer to our goal to reduce climate impact following the Paris Agreement, says Sandra Roos, Vice President Sustainability at Kappahl.

“By 2026, Kappahl aims for 50% of its assortment to be circular. This initiative reflects Kappahl’s commitment to sustainability and its proactive approach to upcoming regulatory changes.”

2. Utilizing the Higg Index  

A crucial part of Kappahl’s sustainability efforts involves utilizing the Higg Index. The Higg Index is a leading suite of tools developed by the CASCALE (former Sustainable Apparel Coalition) to help brands, retailers, and manufacturing facilities measure and score a company or product's sustainability performance. It covers various aspects of the supply chain, including:

• Environmental impact: The Higg Facility Environmental Module (Higg FEM) measures the environmental performance of manufacturing facilities. It covers areas such as energy use, water use, waste management, and chemical management, helping facilities identify and implement improvement opportunities.
  
  
• Social impact: The Higg Facility Social & Labor Module (Higg FSLM) assesses the social and labor conditions within manufacturing facilities. It evaluates aspects like workers' rights, health and safety, wages, and working hours, promoting fair labor practices and improvements in worker wellbeing.
  
  
• Brand performance: The Higg Brand & Retail Module (Higg BRM) evaluates the sustainability performance of brands and retailers. It looks at environmental and social impacts across the entire value chain, including product design, sourcing, logistics, and consumer use, guiding brands, and retailers to enhance their sustainability efforts.

The Higg Index provides valuable insights into the environmental and social performance of fashion brands like Kappahl, enabling them to measure, improve, and communicate their sustainability efforts effectively.

3. Implementing TrusTrace to ensure traceability 

To further enhance traceability efforts, Kappahl has implemented TrusTrace, a tool that provides comprehensive visibility across the supply chain. TrusTrace is a digital platform designed to enable end-to-end transparency, helping companies track and verify the origins and journey of their products. Here’s how TrusTrace benefits Kappahl and the fashion industry at large:

• Supply chain mapping: TrusTrace allows Kappahl to map its entire supply chain, from raw materials to finished products.
• Supplier collaboration: TrusTrace facilitates better collaboration with suppliers by providing a platform to share information and track progress toward sustainability goals.
• Regulatory compliance: With upcoming EU regulations like the Forced Labour Regulation and the Corporate Sustainability Due Diligence Directive, TrusTrace helps Kappahl meet the legal requirements by giving visibility of the supply chain.
• Consumer transparency: By utilizing TrusTrace, Kappahl can provide their customers with information such as the name and address of the factory, the number of workers, and the parent company involved in producing their purchases, enhancing brand trust and loyalty.

TrusTrace exemplifies an initiative that can generate positive impacts throughout the entire supply chain, offering stakeholders a unique opportunity to collaborate for the greater good.

- This year, we will demand all our suppliers to map their supply chain in TrusTrace. I expect this action to be well-received as we offer a free tool to enable due diligence. Making this happen, we contribute to a more responsible world of fashion in the supply chain, says Sandra Roos.

4. Staying on top of upcoming EU legislation 

The European Green Deal is a comprehensive policy initiative striving to make Europe the first climate-neutral continent by 2050. It includes several measures, such as reducing greenhouse gas emissions, advancing the circular economy, and promoting biodiversity.

For example, the Ecodesign for Sustainable Products Regulation (ESPR), formally adopted by the European Council in May 2024, sets requirements for sustainable products and introduces a Digital Product Passport (DPP) to enhance product transparency and traceability. The DPP will provide detailed information about a product's composition, origins, and environmental impact, enabling consumers to make informed choices and facilitating better recycling and reuse practices.

Here are the key aspects expected of DPPs and their significance for businesses like Kappahl:

1. Enhanced transparency: DPPs offer detailed information about a product’s materials, manufacturing processes, and sustainability practices. This transparency allows consumers to make informed purchasing decisions, nurturing trust and encouraging sustainable consumption.
2. Improved traceability: With DPPs, every stage of a product's lifecycle can be tracked, including the sourcing of raw materials, manufacturing processes, transportation, and end-of-life disposal. Enhanced traceability ensures accountability and helps brands verify their sustainability claims.
3. Support for circular economy: DPPs facilitate the resale, recycling, and repurposing of products by providing essential data needed for these processes. This supports the transition to circular business models, where products are designed to be reused and recycled, reducing waste and conserving resources.
4. Compliance with regulations: The European Green Deal mandates DPPs for certain products, including textiles. By adopting DPPs, fashion retailers can ensure compliance with these regulations, avoiding legal penalties and aligning with the EU’s sustainability goals.
5. Lifecycle management: DPPs help manage the entire lifecycle of a product, from production to post-consumer stages. This includes information on repairability, recyclability, and disposal methods, ensuring that products have a longer and more sustainable life.
6. Consumer empowerment: By providing detailed product information, DPPs empower consumers to choose products that align with their values and sustainability goals. This can drive demand for more sustainable products and encourage brands to adopt the approach.

By offering a comprehensive digital record for each item, from production to disposal, DPPs are crucial to the fashion industry's shift towards sustainability. Textile products will be among the first to comply with DPP regulations, underscoring the urgency for fashion retailers to adapt.

- To enhance transparency, traceability, and sustainability across the entire lifecycle of products, and ensure compliance with Digital Product Passport regulations, we need our ERP system to support large-scale circular business models. Standardized and scalable IT solutions will be critical to our sustainability success, concludes Sandra Roos.

“DPPs are crucial to the fashion industry's shift towards sustainability. Textile products will be among the first to comply with DPP regulations, underscoring the urgency for retailers to adapt.”

Conclusion 

Kappahl’s strive towards scalable circular business models highlights the need for innovative digital solutions and solid supply chain management. As the fashion retailer meets regulatory pressures and changing consumer demands, their commitment to sustainability sets a benchmark for the industry. By integrating advanced traceability tools and adapting to new market shifts, Kappahl is paving the way for a more responsible and sustainable fashion industry.