Circular economy in the textile industry is getting stronger in Finland

Huhtamäki’s interest in the circular economy began in his childhood home during the 1990s recession. His family used to buy second-hand clothes and other goods at flea markets. If a key came off a computer keyboard, they would not buy a new keyboard but find a key to replace the lost one.

"When circular economy becomes personal, the topic begins to interest people in a completely new way. Some, like an EU colleague of mine, become aware of the issue through their children".

Huhtamäki is a familiar figure in various contexts involving the circular economy, as he spreads information about the subject in his role as a climate ambassador for the European Union. The European Commission has many ambassadors, but Huhtamäki is the only one specializing in the circular economy. In his role, he highlights the facts of the circular economy and the opportunities it offers for public finances, educational institutions and companies.
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Finland is a pioneer in the recycled clothing business and bottle deposit returns

Finland is second in the second hand clothing business in Europe. The market leader in this field is Poland. However, in other sectors of the circular economy, we are among the weakest in Europe, together with Bulgaria. While the recycling rate for Europe is 12.5%, the figure for Finland is 5%.

Finland does boast one great success story in recycling: the bottle deposit return system. The bottle deposit return system was launched about 30 years ago, and it has been developed over the years to also include a system for PET bottles, for example. Today, the recycling rate is as high as 90%.

"This is where we are number one in the world. The system has been systematically developed, and it involves both society and citizens. This is because the system in Finland is supported by taxation, we have reverse vending machines and people have learned how to return their bottles to stores", Huhtamäki sums up.

Attitudes towards recycling are starting to be what they should be. Young people are increasingly enthusiastic about the circular economy, and older people are also more positive about it than they used to be.

"However, support from society is needed, and it has been great to see that Business Finland’s funding and services for the circular economy has multiplied."

However, companies are not too keen to invest in the circular economy, and social structures do not support the sector. According to Huhtamäki, investments would increase if the circular economy were supported by economic policy. For example, VAT is paid twice on recycled clothing in Finland: both when the garment is first bought and when it is sold second hand.

It is better to recycle clothing at national level than internationally

Clothes have become cheaper and their lifespan shorter. On average, Finns buy 38 garments per year and spend 17.50 euros per garment. If we bought garments of higher quality, they would initially cost a little more, but last longer. And when we recycle our high-quality clothes, income is generated in the national economy and the trade balance improves.

The difference between the international and the local circular economy must also be understood. When a three-euro shirt is flown to Finland from Poland, for example, this is not very sustainable business compared to a t-shirt from the nearby area.

"The amount of clothes transported by air from various parts of the world is baffling. For example, Customs statistics show that two million pieces of headwear have been flown to Finland, while there are about six million of us Finns. A total of 28 million low-value parcels worth less than 150 euros each are sent from China to Finland every year."

Innovations are also being made in the recycled clothing business. For example, the greatest innovation and change in thinking for Emmy Clothing under Huhtamäki was the piloting of second-hand clothes in an S Group department store.

"The pilot was carried out three years ago in the Sokos department store in Tampere. The clothes were sorted by brand, and the information systems were updated. The reception was very positive. Since then, sales locations have also been added to the Sokos stores in Helsinki and Turku", Huhtamäki says.

Thought biases and technical barriers

The reuse of recycled garments involves various challenges. 57% of all fibers used in clothes are polyester, i.e. plastic. If polyester is blended with cotton or elastane, such a garment cannot be processed, which means it cannot be used as a recycled material for textiles.

Around the world, 100 billion garments are manufactured every year, and one in three of them will never be sold. Clothes also experience social deaths, that is, they stay in the wardrobe if they go out of fashion.

"This terrible waste is evident in Chile, for example, with mountains of textile waste that can be seen from space. Fortunately, the number of fashion business operators that manufacture timeless and durable products is also growing", Huhtamäki is pleased to note.

We also need to address challenges posed by the upbringing of our children. On average, a Finnish child has 238 toys that have been given as gifts or as rewards for good behavior, and so on. Some of the toys are electrically powered: products such as spinning lollipops.

"We may ask ourselves why we make our children used to a huge amount of goods, or what children need electricity for, and why we use scarce natural resources and minerals recklessly."

Attitudes could also be improved: many are reluctant to buy second-hand bedding, while having no problems with washed hotel sheets.

Timing is particularly important in the recycling business. For example, each year in August, 20,000 students move into their new homes in Helsinki and purchase second-hand goods for those homes. The market is not able to meet the demand because it has not embraced the annual cycle and seasons.

Circular clothing business is worth money

If we want to promote the circular economy and make it a viable business, we need changes in behavior and market structures, as well as perseverance. We are still in the early stages of the circular economy, and the change could take decades.

There has been no economic assessment of the circular economy in Finland, but this has been done in England. A 2022 study by the local statistics office and Barclay's Payments found that the second-hand trade in the UK had created nearly 50,000 jobs and £7 billion of added value.

Applied to the Finnish economy, this corresponds to nearly 5,000 jobs in Finland, as well as EUR 600–700 million of economic value added.

"Second-hand business creates economic wealth and a circular economy, which, unfortunately, is not visible in statistics or the GDP. They equal approximately EUR 1 billion in revenue in the second-hand trade, representing 0.3% of GDP."

The circular economy of garments can replace imports, leaving billions of euros in Finland. According to Huhtamäki, efforts to advance the circular economy should also be promoted, as it creates work and generates both value added tax and corporate tax. For example, a tax credit for household expenses cannot be claimed for repairing furniture, while the credit can be claimed for assembling a piece of new furniture. In Finland, there is also a shortage of professionals who know how to repair products.

"Sweden is already further along the road to circular economy, as VAT on repair services has already been halved there", Huhtamäki points out.

Companies should look far into the future

There is demand for the recycling business, as natural resources are diminishing and logistics costs are rising. Product volumes will decrease and their life cycles will be extended.

In the future, the purchasing power affecting the circular economy will increase as Generation Z (born 1997–2012) becomes wealthier. Already, the number of clothing business entrepreneurs has increased significantly both online and in brick-and-mortar stores.

"Looking at the situation 10–20 years from now, the recycling business will have a competitive advantage that I hope our companies will notice. They need to observe the change in the world and position their businesses accordingly. Focusing only on the next quarter is not enough", Huhtamäki notes.

Business Finland has tackled the circular economy bottleneck for consumer brands

The circular economy accounted for 15% of all innovation activities funded by Business Finland in 2023–2024. During this period, funding of more than EUR 200 million was granted to circular economy solutions. Consumer brands accounted for only a few percent of this.

"There is a clear bottleneck here, comments Anne Rahikainen, a consumer business expert from Business Finland. EU regulations compel companies to innovate sustainably, so this is more than an ambition. We fund the development of circular economy services and solutions that support the sustainable development of consumer business as well as technological solutions. The regulation on the digital product passport will come into force in 2027. The digital product passport will enable companies to provide the buyer with information on the origin, environmental impact, life cycle and recycling of the final product."

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