New whitepaper highlights opportunities for a circular and digital textile value chain

The European textile industry is at a pivotal moment. With stricter legislation on the way, growing geopolitical pressure and an increasing demand for sustainability, the sector needs to transform faster than ever. In a new white paper, researcher and NewTexEco Data Orchestrator Francesco Sollitto, together with several colleagues, analyses the green and digital transition required to future-proof the textile, clothing, leather & footwear (TCLF) sector. His main message? Without data sharing, clear rules and fair taxation, a circular textile chain won’t happen.

“We’ve been talking about sustainability for years, but as long as we don’t share information, we have limited understanding of what’s happening in the chain,” says Sollitto, also a reseacrher and data orchestrator at the Amsterdam University of Applied Sciences. “And that includes the Netherlands, one of the most digitalised countries in the world. We still have limited knowledge about how much is produced, imported, and sold (both in kg or # of items) across the different textile product categories.”

The whitepaper Systemic Value Chain Transformation outlines the impact of new European legislation, including the upcoming Digital Product Passport. This passport will require companies to disclose product information, from material composition to recyclability. According to Sollitto, this shouldn’t be viewed as a threat, but as an opportunity.

“Companies often think data sharing means exposing their secrets. But that’s rarely the case. It’s about sharing essential information that helps us work together more effectively — things like location, production volumes and material flows. We’re not asking for profit margins or CEO salaries.” Making this type of data accessible enables companies across the chain to align their processes, a crucial step for circular production, repair and recycling.

The whitepaper also shows that digitalisation benefits more than just policymakers.

• Businesses can plan more efficiently, localise production and make better use of residual streams.
• Regional and national policymakers gain the data they need to develop effective circular policies.
• Consumers can be matched with more sustainable products, just as algorithms already recommend content and generate ads today.

“If we use data intelligently, we can produce far more efficiently,” Sollitto explains. “It brings us closer to true on-demand production — a system where you only produce what’s needed, when it’s needed. That alone prevents enormous amounts of surplus.”

But the most significant barrier to a circular textile chain, says Sollitto, isn’t technology, but taxation (or incentive structure). “As long as repairs, second-hand clothing and recycling are taxed as if they’re standard linear production, circular entrepreneurs don’t stand a chance to thrive,” he argues. “Why do you pay 21% VAT on repair? Why does someone working in a second-hand shop pay nearly 50% income tax, while they’re contributing to restoring value rather than producing new items?”

The whitepaper points to similar incentive structures already used in other sectors, such as construction and food. Comparable models could also work in the textile industry. Sollitto also refers to a French proposal for a progressive Extended Producer Responsibility (EPR) system, which places higher costs on major polluters. “It’s politically sensitive, of course, so it is not quite happening yet. But if we don’t have the conversation, change will never come. We need policies that actively protect circular players, otherwise they’ll always struggle and eventually disappear.”

One of the most noteworthy findings from the research is the economic imbalance caused by the textile trade. “In less than a decade, the Netherlands has lost more than €15 billion through the textile trade deficit,” Sollitto explains. “We import far more than we export. Almost everything we wear comes from Asia, while the textile we do produce here is mainly high-value technical textile intended for export.”

The European figures are equally startling: the EU imports more than it consumes and exports more than it produces. Materials enter the chain, but don’t return — a clear sign of systemic overproduction. “It’s frankly absurd,” says Sollitto. “There are around 35 kilos of textiles per person placed on the market each year, yet we only consume 26. And still, every year we import more than we use and export more than we produce. It’s a chaotic system nobody fully controls.”

Another challenge — also mentioned in the whitepaper — is the rise of ultra-cheap platforms like Shein and Temu. By exploiting European exemption rules, these companies pay almost no import duties, keeping prices extremely low. “The ministry knows these platforms are bypassing the rules, but no one intervenes,” says Sollitto. “We have strict rules within the EU, but at the same time, a wide-open back door for China. It raises a fundamental question: what is the point of the EU, if fair trade isn’t enforced?”

Consumers continue to buy cheap clothing, even when they care about sustainability. “If a sustainable sweater costs fifty euros more than a fast-fashion alternative, people will choose the cheaper option — logically,” Sollitto says. “You can’t blame consumers. The problem lies in the system that allows such low prices in the first place.”

Despite the challenges, Sollitto remains (moderately) optimistic. He sees many Dutch startups and circular initiatives making a real impact: from organisations collecting and sorting textile waste to repair workshops and upcycling entrepreneurs. “These are the people building the future,” he says. “But if they face the same tax burden as traditional companies, they won’t survive. We need to protect them . Otherwise, in ten years we’ll be discussing yet another failed transition.”

A circular textile industry will only become a reality if Europe embraces three things:

1. Data sharing as the foundation for collaboration
2. Smart, fair fiscal rules that reward (local) circular players
3. Clear and bold legislation that truly tackles overproduction

As Sollitto puts it: “We need to stop seeing each other as competitors and start working together. Transparency isn’t a threat — it’s the only way to build a resilient, future-proof textile chain in Europe.”