Europe’s circular fashion sector could generate more than €104 billion (US$118 billion) in annual revenue by 2030 and create over 88,000 new jobs, according to a new study by consulting firm KPMG and France-based Fédération de la Mode Circulaire (FMC), highlighting the growing economic potential of circular business models as the European Union pushes ahead with sweeping sustainability regulations.
The report, titled State and Prospects of Circular Fashion in Europe, was unveiled during FMC’s Circular Fashion Day conference in Paris and paints a picture of an industry undergoing a profound transformation. As fashion brands face mounting environmental pressures, evolving consumer expectations and increasingly stringent regulations, circularity is emerging as a central pillar of Europe’s textile and apparel strategy.
The findings come at a challenging time for Europe’s fashion industry. Demand across several major markets remains weak amid economic uncertainty, while manufacturers continue to struggle with high energy prices, rising labour costs and growing competition from lower-cost sourcing destinations in Asia and other regions.
According to KPMG, Europe’s textile and apparel sector has experienced a significant erosion of industrial capacity over recent decades. Employment in the industry has declined sharply, reducing the region’s manufacturing competitiveness and increasing reliance on imports.
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“Energy costs are structurally high in Europe, creating a competitive disadvantage compared with many manufacturing countries, particularly in Asia,” Mina Bishop, Senior Manager for Circular Economy at KPMG, said during the presentation of the report.
Despite these challenges, the study argues that circular fashion presents a major economic opportunity. Business models such as resale, repair, rental, refurbishment and textile recycling are expected to expand rapidly over the coming years, supported by both policy measures and growing consumer awareness of sustainability issues.
The report estimates that the circular fashion market could account for a substantial share of the European apparel sector by the end of the decade. Revenue growth is expected to be driven by increased adoption of second-hand fashion platforms, repair services, fibre-to-fibre recycling technologies and innovative circular business models that extend product lifecycles.
A key finding of the study is that regulation, rather than voluntary corporate sustainability initiatives, is becoming the primary driver of circularity across the European fashion industry.
Over the past few years, the European Union has introduced an ambitious policy framework aimed at reducing textile waste and promoting sustainable production and consumption patterns. These measures include Extended Producer Responsibility (EPR) schemes, Digital Product Passports (DPPs), mandatory textile waste collection systems and discussions around reduced value-added tax rates for repair and resale activities.
Industry experts believe these regulations are fundamentally changing how fashion companies operate.
“We need harmonised regulation to provide clarity for businesses, confidence for investors and fairness in competition,” said Stephanie Taupin, Director of Sustainability Strategy and Green Transition at KPMG.
Among the various policy tools, Extended Producer Responsibility is expected to have the most significant impact on the fashion sector.
Under EPR systems, brands and retailers become financially responsible for the collection, sorting, recycling and treatment of products once they reach the end of their useful life. This effectively transforms waste management from an external concern into a direct business cost.
Industry analysts say the measure creates a strong incentive for companies to rethink product design, sourcing strategies and material choices. Brands that produce more durable, recyclable and lower-impact products may face lower long-term compliance costs, while those relying on fast-fashion business models could see expenses rise.
The report notes that EPR schemes encourage manufacturers to reduce overproduction, improve product longevity and increase the use of certified sustainable materials. Such measures align closely with the EU’s broader objective of transitioning from a linear “take-make-dispose” economic model to a circular economy that prioritises resource efficiency and waste reduction.
Digital Product Passports are also expected to play a crucial role. These digital records will provide detailed information about a garment’s composition, origin, environmental footprint and recyclability, helping consumers, recyclers and regulators make more informed decisions.
The growing emphasis on circularity is already reshaping investment trends across Europe. Venture capital and corporate funding are increasingly flowing into textile recycling technologies, traceability solutions and resale platforms as investors position themselves for the sector’s anticipated expansion.
Fashion brands are also accelerating efforts to integrate circular practices into their operations. Major retailers and luxury labels have launched repair services, resale initiatives and garment take-back programmes as they prepare for future regulatory requirements and seek to meet sustainability targets.
For the textile industry, the transition could create new opportunities beyond environmental benefits. The report suggests that expanding circular value chains could help rebuild parts of Europe’s industrial base by creating jobs in repair, sorting, recycling and remanufacturing activities that are difficult to offshore.
At the same time, challenges remain. Scaling textile recycling technologies, securing investment, harmonising regulations across EU member states and encouraging consumer participation will be critical to achieving the projected market growth.
Nevertheless, the report concludes that circular fashion is rapidly moving from a niche sustainability concept to a mainstream economic opportunity. With supportive regulations, technological innovation and increasing industry engagement, Europe’s circular fashion market could become one of the region’s most significant growth sectors over the next decade.
As policymakers intensify efforts to reduce textile waste and strengthen sustainability across supply chains, the study suggests that circularity may not only help address the environmental impact of fashion but also contribute to revitalising Europe’s textile and apparel industry in an increasingly competitive global marketplace.
