Scaling circularity in the textile industry requires more than advances in recycling technologies and material innovation. According to insights shared by the H&M Foundation following Textile Exchange 2026 in Vancouver, the transition towards circular textile systems also depends on closer coordination between collectors, sorters, recyclers, manufacturers, brands and investors.

While many industry stakeholders share the ambition of establishing circular material flows, practical implementation remains challenging. Investment decisions are often interdependent: recyclers require reliable demand before expanding capacity, brands need consistent supplies of recycled materials before making purchasing commitments, and investors seek confidence in the commercial viability of new business models.

The H&M Foundation argues that overcoming these barriers requires a more integrated approach to developing circular value chains.

Circularity requires coordinated investment

Discussions at the conference highlighted the importance of developing feedstock availability, recycling capacity, financing, infrastructure and market demand as interconnected elements.

Improving individual stages of the recycling process is not sufficient if other parts of the value chain remain underdeveloped.

Recycling companies, for example, may be able to expand processing capacity but still depend on access to suitable textile waste in sufficient quantities and consistent quality. Collection and sorting businesses, meanwhile, require reliable markets, adequate infrastructure and commercially viable pricing to supply recyclable materials.

According to the H&M Foundation, progress often stalls because individual stakeholders are waiting for commitments from others before investing themselves.

Reducing this uncertainty through coordinated commitments could help accelerate the development of commercially viable circular textile systems.

Inclusive circularity and the economics of textile sorting

A central theme of the H&M Foundation's assessment is the concept of inclusive circularity, which emphasises the participation of all actors involved in recovering, processing and reintroducing materials into production.

The Foundation argues that collection, sorting and aggregation activities must be economically sustainable if circular textile systems are to operate at industrial scale.

During the conference, participants highlighted that sorting textiles for recycling can currently generate financial losses despite being an essential step in supplying suitable feedstock to recycling facilities.

This illustrates a broader challenge: the costs and risks of establishing circular supply chains are not necessarily distributed among the same stakeholders that ultimately benefit from the resulting materials.

The H&M Foundation therefore advocates business models that enable collectors, sorting companies and other upstream participants to receive viable returns for their contribution.

Bringing the textile value chain together

During Textile Exchange 2026, the H&M Foundation hosted a discussion in collaboration with Textile Exchange, bringing together representatives from different stages of the textile value chain.

Participants included stakeholders involved in material collection, manufacturing, recycling, sourcing, finance, standards and policy development.

The discussions focused on identifying barriers to implementation and exploring how cooperation could help address challenges that individual organisations cannot resolve independently.

Particular attention was given to the role of first-mile actors, including businesses and workers responsible for collecting, sorting and preparing materials for recycling.

According to the Foundation, these stakeholders should not only participate in circular systems but also contribute to decisions about how they are designed and implemented.

From shared ambitions to practical commitments

The H&M Foundation concludes that industry-wide sustainability ambitions must increasingly translate into coordinated commercial commitments.

Reliable feedstock supplies, long-term purchasing agreements, financing mechanisms and partnerships could help reduce investment risks and create greater confidence across the value chain.

The organisation also emphasises that the transition to circular textiles must consider how economic value is distributed. Placing additional costs and responsibilities on upstream suppliers without corresponding commercial benefits could undermine the long-term resilience of circular systems.

The findings underline a fundamental challenge for the textile industry: achieving circularity at scale requires not only technological innovation but also economically viable relationships between all participants in the material value chain.