The Textile Industry Enters the Circularity Race: What Do Businesses Need to Prepare, from Design to Data?

The textile industry is facing a transformation that goes beyond recycled materials or the collection of used clothing. The circular economy is increasingly affecting the entire product life cycle, from how businesses select fibers, design products, dye and finish fabrics, and organize production to how they provide information after goods are sold.

What is notable is that this requirement is no longer limited to voluntary sustainability programs. Many major import markets are developing policy frameworks to extend product lifespans, improve repairability and recyclability, and require businesses to provide clearer evidence of material origins and environmental impacts. For Vietnamese manufacturers, this is both a compliance pressure and a competitiveness challenge within global supply chains.

From “green” products to managing the entire life cycle

For a long time, the sustainability activities of textile businesses were often assessed through several factory-level indicators, such as saving electricity, reducing water consumption, treating wastewater, or using renewable energy. These areas remain important, but they do not fully reflect the direction of product policies in developed markets.

The European Union’s Ecodesign for Sustainable Products framework, established under Regulation (EU) 2024/1781, expands the approach from certain energy-related product groups to a broader range of physical products. The regulation provides a basis for setting requirements concerning durability, repairability, recyclability, resource efficiency, and product information. Textiles are among the industries being closely monitored as related policies are implemented.

One concept associated with this approach is the Digital Product Passport. Essentially, this is a mechanism for storing and providing information about products, materials, components, or related characteristics throughout the life cycle of goods. The specific implementation depends on regulations for each product group, but the general trend is that environmental information will need to be organized more systematically rather than appearing only in brief claims on product labels.

For apparel businesses, this may change how data is managed. Information about fiber composition, the proportion of recycled materials, raw-material sources, chemicals used during processing, care instructions, and recyclability will no longer be merely internal data held by individual departments. It may become part of a product file shared with customers, importers, regulators, or recyclers.

Three major bottlenecks in the textile supply chain

Recycled materials do not solve the entire problem

Switching from virgin fibers to recycled fibers is often viewed as an environmental improvement, but its real effectiveness depends on the material source, processing technology, and how businesses verify the information. Post-consumer plastic bottles, industrial waste, fabric scraps, and used clothing have different characteristics; recycled fibers cannot automatically be considered equivalent.

Recycling at the end of a product’s life is also more complex when products contain multiple fiber types. A product made from polyester and cotton, for example, may require separate separation or processing technologies. Accessories such as zippers, buttons, sewing threads, coatings, adhesives, and decorative details also affect the ability to disassemble and recycle a product. Therefore, changing only part of the material without considering the product’s entire structure may produce limited results.

This is why design principles for circularity are emphasized in many international documents. Products need to be created with an appropriate lifespan, be repairable when necessary, use materials that create fewer obstacles to sorting, and facilitate the recovery of components after the products are no longer used.

Traceability still depends on data from multiple tiers

An apparel brand often purchases products through a multi-tier network that includes garment factories, cutting facilities, fabric suppliers, spinning mills, chemical manufacturers, and original raw-material sources. Each tier may record data differently. If information is not standardized, businesses at the end of the chain will find it difficult to accurately demonstrate what type of fiber a product is made from or what processing stages it has undergone.

This challenge is particularly clear when businesses use claims such as “recycled,” “organic,” “responsible,” or “low impact.” Such claims have value only when accompanied by an appropriate scope of application, verification method, and supporting records. Third-party certification can help increase credibility, but it does not completely replace data management within the business and among suppliers.

Therefore, traceability should not be viewed as a technology project separate from procurement activities. Businesses need to determine what data is mandatory for each product group, who is responsible for updating it, how cross-checks will be conducted, and how long records will be retained. When market requirements change, a structured data system will help businesses respond more quickly than manually collecting documents for each order.

Collection and recycling require coordination beyond the factory

Factories may have better control over the quality of waste generated during cutting and sewing, but once clothing reaches consumers, it falls outside the business’s direct operational control. This creates a significant gap between production and the end-of-life stage.

Filling this gap requires the participation of many stakeholders: brands, retailers, consumers, collection operators, sorting facilities, recyclers, and regulators. Without suitable sorting systems, recovered materials may lose value or fail to meet the quality needed to re-enter the production chain. Conversely, if product design takes disassembly and sorting into account from the outset, end-of-life processing costs can be managed more effectively.

Where should Vietnamese businesses start?

Not every business can immediately invest in recycling lines or build a large-scale data platform. A practical roadmap should begin by identifying the products and markets with the highest requirements, and then building capabilities step by step.

First, businesses need to map the materials used in their core product lines. This map should record not only the proportions of cotton, polyester, or viscose, but also the sources of raw materials, processing stages, key accessories, related chemicals, and possible alternatives. This approach allows design, procurement, and production teams to work from the same data structure.

The next step is to review the environmental claims currently used in sales materials and communications. Each claim needs corresponding evidence. If there is not enough data to state that a product has a lower environmental impact, the business should accurately describe the scope of the improvement instead of using broad terms that could cause misunderstanding.

Design also needs to be placed at the center of the circularity strategy. A garment that is more durable, easier to care for, and usable for a longer period may create greater benefits than a minor change in packaging. Designers need to work early with technical teams and suppliers to consider seam durability, the replaceability of accessories, the degree of material blending, and options for disassembling the product.

For contract-manufacturing factories, investing in data and process-control capabilities can deliver immediate benefits in relationships with international customers. Clear material records, accurate consumption specifications, and energy and water consumption data can help factories meet the assessment requirements of multiple brands without rebuilding the system for each customer.

Compliance costs and opportunities to move up the value chain

Shifting to a circular model will certainly create additional costs. Businesses may need to allocate resources for testing, certification, digitizing records, staff training, changing materials, or testing new designs. In the short term, these costs may put pressure on profit margins, especially for suppliers that compete primarily on manufacturing prices.

However, if data and sustainable-design requirements become common conditions in purchasing activities, delaying preparation will also create costs. A factory lacking traceability records may spend more time providing additional information, face restrictions when taking orders with demanding requirements, or become more dependent on intermediaries. By contrast, businesses with reliable data will have a basis for demonstrating their capabilities and becoming more deeply involved in product development.

The opportunity lies not only in selling a “greener” product. Businesses can develop repair, reuse, material take-back, or recycling-partnership services. These models require different revenue calculations and operating structures from traditional manufacturing, but they may help businesses build longer-term relationships with brands and consumers.

Even so, caution is needed when turning circularity into a marketing slogan. A small-scale collection program or the use of a certain proportion of recycled material does not automatically make the entire supply chain circular. A serious assessment must consider product durability, material sources, process impacts, the potential for reuse, and the actual results after goods are discarded.

The market will require more than voluntary claims

Policy changes in Europe show that product regulation is gradually shifting from general encouragement toward more specific requirements for design and information. Rules on preventing misleading green claims, extended producer responsibility, and requirements related to sustainable products may continue to influence how brands select suppliers. Businesses need to monitor the scope, timing, and content of each policy directly through official documents.

In Vietnam, the impact will not be limited to businesses that export directly to Europe. Global brands often pass requirements for materials, data, and supply-chain controls down through multiple supplier tiers. Therefore, even businesses that do not sell directly into this market may need to meet similar standards if they want to maintain their position in international supply chains.

In this context, the advantages of textile businesses will no longer be measured only by production capacity, labor costs, or delivery speed. The ability to provide accurate data, coordinate with suppliers, improve designs, and demonstrate environmental results will increasingly influence purchasing decisions.

The circular economy should therefore be viewed as a program to upgrade production capabilities, rather than as a short-term communications campaign. Businesses that start early by standardizing data, understanding their materials, and incorporating life-cycle criteria into design will have more time to experiment. As market requirements become more specific, this foundation may determine whether a business merely meets minimum requirements or becomes a higher-value partner in the global textile industry.