10. TEXTILES

The textile sector plays a significant role in the global economy, and its consumption, especially in fashion, is rapidly growing in the Nordic countries. However, this growth has brought significant environmental consequences across the entire lifecycle of textiles, from production to end-of-life phases. Approximately 80% of the climate impact from textiles occurs during the production phase (Moazzem et al., 2022), making it a critical area for intervention.

In the Nordic Region, the average consumption of textiles is between 13-16 kg per capita annually, resulting in around 350,000 tonnes of new textiles entering the market each year. Unfortunately, only about 120,000 tonnes of used textiles are collected for reuse and recycling, mostly through charitable organisations (Fråne et al., 2017). Recognising the environmental impact of the textile sector, the Nordic Council of Ministers introduced The Nordic Textile Reuse and Recycling Commitment in 2017, which offers voluntary certification for textile collection aimed at reuse and recycling (Fråne et al., 2017). However, the reality of textile recycling is fraught with challenges. One of the biggest hurdles is the complexity of separating textile fibres, especially in blended fabrics, which complicates the recycling process (Kaipia et al., 2022).  Additionally, the infrastructure for large-scale textile recycling is still underdeveloped. Many textiles contain synthetic fibres, dyes, or finishes that make it difficult to recycle them into new materials without losing quality. These limitations mean that most textiles, even when collected for recycling, are downcycled into lower-value products or are incinerated.

Thus, models extending the life span and usage of textiles are necessary. According to the Ellen MacArthur Foundation, combining resale, rental, repair, and remaking models could cut fashion industry emissions by 16% by 2030, contributing a third of the reductions needed for the sector. Efficient use of clothing from subscription-based rental models specifically can reduce emissions by 41% compared to the linear model (Ellen MacArthur Foundation, 2021b).

PSS models for textiles have been available for decades and have shown promise for economic viability, especially in markets such as the United States (Lacy et al., 2020). From mid-market to luxury goods, PSS models like rental, resale, and repair services show strong potential to not only reduce waste but also drive positive margins – particularly in the luxury sector, where these models can yield higher profits per garment compared to traditional linear models (Fashion for Good, 2021).

In the Nordic market, PSS models for workwear and household textiles are well-established and driven by demand from sectors like hospitality and healthcare. In contrast, the market for casual and festive clothing rentals remains less developed, with services mostly focused on special occasions and limited adoption of models for everyday wear. Despite this, the potential for such models to reduce the need for new clothing production and extend garment lifespans is significant, especially as consumers become more aware of sustainability issues in the fashion industry.

Most PSS providers in the household textile category offer comprehensive solutions, including washing and delivering textiles, primarily targeting the B2B and B2G markets. One example is Textilia, which operate in Denmark and Sweden. This company, formerly known as Danske Forenede Dampvaskerier (1958), offers industry-specific laundry and rental solutions to five market divisions, including HoReCa, cleaning, and healthcare sectors. Through its Textilia Trace system, customers benefit from digitally integrated solutions that provide easy access and stock tracking. Textilia is also committed to sustainability, with an ambitious goal to recycle 100% of its textiles by 2025 (Textilia, 2021).

Lindström, based in Finland, offers a wide range of textiles, such as mats, restaurant textiles, and workwear – the latter being the most income-generating. It has a global outreach and emphasizes a circular business model through rental, maintenance, and recycling. Providers of PSS workwear like Lindström first and foremost offer convenience, as customers are offered a total solution for the workwear. This can include personalisation, maintenance, repairs, washing, and delivery directly to staff locker rooms (Lindström, n.d.-b). Given the size and experience of companies like Lindström, the workwear market for PSS is well developed. This maturity allows them to implement sustainability strategies, such as reuse, repair, recycling, and reducing waste and water (Ellen MacArthur Foundation, 2021a).

The Danish company Gardin Lis specializes in leasing curtains for B2B and B2G markets. The company offers flexible payment options and provides take-back services for old curtains, enabling it to lease or sell reused curtains. This approach helps extend the life of curtains and prevent waste generation. Gardin Lis also stands out with its mobile “Gardinbus” service, where it visits clients to assist with measuring, selecting, and discussing leasing options (Gardin Lis, n.d.). Similar to Textilia and Lindström Garden Lis also has their own laundry and workshop for maintenance and repair of curtains.

Belle Carpets and Rugs is a family-owned product-oriented business that sell hand-knitted Oriental carpets B2B and B2C and offer repair and cleanse of the rugs to prolong the product lifetime. Belle’s value proposition for businesses is to provide durable and long-lasting rugs instead of conventional rubber mats with high climate impact and short lifetime. Belle has an elaborate supply chain, for instance among nomadic tribes and villages in Iran, where the rugs are produced (Belle, 2020).

In summary, PSS solutions for household textiles in the Nordics are well-established, mainly in B2B and B2G markets. Demand for these solutions is rising, especially among industries like hotels and hospitals, due to increased focus on reducing waste and climate impact (Kumar et al., 2022). While companies like Textilia and Lindström focus on broad industry-specific textile solutions, Gardin Lis and Belle Rugs operate within a more specialized niche, focusing on the leasing of curtains and rugs. All providers share a commitment to extending product lifespans, reducing waste, and meeting recycling goals, which are vital to addressing the environmental impact of textile consumption.

B2C rental services for casual clothing are becoming increasingly common in many Nordic countries (Piontek et al., 2020), and renting festive clothing has been popular for a while. The rental services generally fall into two main categories: membership-based models with a monthly subscription, often centred around physical shops and with a strong focus on consumer education and community, and one-off rentals for special occasions, typically facilitated via social media and regular shipping services. Some established brands have also introduced in-house rental services to supplement their regular sale.

Monitoring the Nordic business landscape revealed that out of the monitored 29 rental services, all of which were founded after 2013, 12 had ceased operations before the summer of 2024. This shows a market with many newcomers and relatively short company lifespans. This was also evident in the pilot company included in this project, which ceased operations in its current form in early 2024, indicating that the current business conditions in the Nordics are still unfavourable for these businesses. The monitoring also revealed a market characterized by female micro-companies targeting female consumers.

Although clothing rental models in the Nordics are still small-scale and have not yet disrupted traditional linear models, they are beginning to challenge the demand for new clothing. Many rental members report that renting solutions satisfy their desire to renew their wardrobes without buying something new. This keeps garments in use longer, extending their lifespan and offering a sense of “newness” to multiple consumers.

Studies suggest high entry barriers, such as the desire for ownership and fear of loss or damage.Additional barriers include perceptions of rentals as time-consuming or complicated as well as hygiene concerns (Bodenheimer et al., 2022). The high entry barrier was also evident in the pilot company, Vaatepuu, which offers both casual and formal wear rentals on monthly subscriptions. The company observed strong interest from its target group, with nearly 5,000 social media followers. However, this interest did not fully translate into memberships, as the pilot company had fewer than 300 paying members. To address this barrier, many Nordic rental companies provide detailed FAQs on their websites on loss and damage, laundering, and shipping. As for hygiene, recent studies (Bodenheimer et al., 2022) and the pilot study dispute those concerns, as members of the pilot company expressed a high trust in the other members and their ability to wash and treat the clothes according to their own standards.

In line with the consumer concerns mentioned above, a lack of standard policies and solutions in clothing rentals can create uncertainty and hinder scalability. Without consistent frameworks for handling aspects like rental periods, loss, and damage, customers may feel uneasy about what they are committing to (Bodenheimer et al., 2022). In the case of the pilot company, members were allowed to customise their rental periods, and issues like loss and damage were addressed on a case-by-case basis. While this flexibility worked well for long-standing members who trusted the company, it posed a barrier for new customers unfamiliar with these informal arrangements, who may expect more clarity and consistency.

On the technical driver side, advancements in digital infrastructure present an opportunity to mitigate these issues. Emerging digital solutions, such as integrated platforms for managing rental inventories, tracking garment lifecycles, and facilitating maintenance, offer the potential to streamline operations and boost consumer confidence. Such innovations could help companies provide a smoother, more transparent customer experience, leading to higher adoption rates and scalability. Moreover, companies that leverage digitalisation –particularly in the form of integrated communication and transaction platforms like Instagram – are able to cut operational costs by bypassing physical stores and managing everything from inventory to customer service online.

However, for companies that are still operating on analogue systems, the shift to digital administration poses challenges. The need to comply with digital contract requirements from tax authorities, paired with the frequent transactions typical of rental models, can lead to increased administrative complexity. Thus, while digital solutions offer great potential, adopting them requires a significant investment in infrastructure, especially for smaller, more traditional businesses.

Clothing rentals generally struggle to compete with fast and ultrafast fashion since there are no economic incentives for consumers to rent from fast fashion brands when they can buy them so cheaply. Rental models for casual clothing struggle specifically in the regard, as casual clothing does not retain its value as long as occasional wear (Bodenheimer et al., 2022).

Lack of financial guidance and encouragement was identified as another economic barrier for company owners, as business guidance networks seem unable to help. Another barrier is that investors struggle to understand the model and require a successful existing business case to prove that this can be profitable at scale before daring to invest. This was expressed both by PSS providers and by an investor.

Clothing rentals generally struggle to compete with fast and ultrafast fashion since there are no economic incentives for consumers to rent from fast fashion brands when they can buy them so cheaply. Rental models for casual clothing struggle specifically in the regard, as casual clothing does not retain its value as long as occasional wear (Bodenheimer et al., 2022). Lack of financial guidance and encouragement was identified as another economic barrier for company owners, as business guidance networks seem unable to help. Another barrier is that investors struggle to understand the model and require a successful existing business case to prove that this can be profitable at scale before daring to invest. This was expressed both by PSS providers and by an investor.

Our market research shows that most clothing rental companies in the Nordics are owned by women and primarily target female consumers, reflecting broader industry trends, as women on average spend three times more on apparel than men (Brown et al., 2018). Our study uncovered several gender-specific barriers faced by clothing rental companies:

Challenges for female-owned companies: A rental company interviewee noted that potential investors focused on risks rather than expansion plans, asking questions like “Have you thought about…?” or “Do customers really like this?” This forced her into a defensive position making it difficult to highlight her business’s potential. This aligns with research showing that investors tend to ask women risk-oriented questions, while men are questioned about achievements – ultimately leading to lower funding for female entrepreneurs (Kanze et al., 2017).

Bias against feminine products and services: Gender biases affect not only the entrepreneur’s gender but also the product and target consumer. One example from the study involved a male investor showing scepticism toward a female-focused product he couldn’t relate to. This aligns with literature on the commodification of femininity, where female entrepreneurs are seen as providers of gender-specific products (Ahl & Marlow, 2021). Clothing businesses by women for women often embody commodified femininity, creating a strong identification between founders and customers, which proved to be a strong driver in the pilot company. However, this focus can limit the scope of their businesses to gender-specific markets, making it harder to expand.

Circular business models viewed as feminine: Sustainable and circular business models are often viewed through a gendered lens, with both concepts being associated with “feminine” values. This was evident in dialogues with investors about their approach to clothing rental companies, illustrated in the quote. Research suggests that women in the Nordics are more concerned with sustainability while men dominate STEM fields and green economy sectors (Sand, 2022). This gender skew can lead to investments being directed toward male-oriented solutions, potentially sidelining women-led ventures in circular industries.

In sum, female entrepreneurs in Nordic clothing rentals appear to face a triple intersection of financial barriers: being women, targeting a female audience, and building businesses on circularity values.

The pilot study identified a regulatory barrier in the lack of supportive taxation policies. In Finland, selling used items is exempt from VAT, but rentals are not, placing clothing rental companies at a disadvantage compared to second-hand markets, as they must pay VAT on every rental. In Norway, a uniform VAT rate of 25% applies to all product sales, rentals, repairs, and resale, creating equal challenges for all circular business models.

Additionally, as seen with other product groups, the regulatory framework tends to favour linear business models. Cheap resources and relatively expensive labour make it more cost-effective to produce new items rather than support services like rentals, repairs, and maintenance. This imbalance creates financial hurdles for circular models that rely on labour-intensive processes to extend product lifecycles.

Clothing rental models can potentially increase the use of items through repeated rentals to different customers (Bodenheimer et al., 2022). Studies show that renting clothing can result in lower CO₂e emissions compared to buying, except in comparative scenarios where owned dresses are worn frequently, and rental trips involve car travel. When used efficiently, subscription-based rental models can reduce emissions by 41%, compared to the linear model, according to a scenario analysis by Ellen MacArthur Foundation (Ellen MacArthur Foundation, 2021a).

A case study resembling the pilot in location, size, and product categories found that transportation had a greater environmental impact than the extra maintenance or laundry associated with rental models, particularly for formal wear requiring minimal washing (Spark Sustainability, 2022). Since formal dresses are rarely worn until their end of life, renting them tends to be more climate-friendly than renting basic wear, typically worn more often.

The pilot study also demonstrated environmental benefits. Members reported substituting new clothing purchases by renting specific outfits for special occasions or relying heavily on rental services for formal workwear. This shift helps reduce the demand for new clothing items, even though it is important to note that not all rentals substitute purchases. Additionally, members mentioned that their rental membership made them more comfortable wearing second-hand clothing, which subsequently influenced their willingness to buy second-hand items outside the rental service. Interviews also revealed that members became accustomed to higher-quality garments through the rental service, which led them to prioritise quality when purchasing new clothes. Since clothing rental models rely on the repeated use of items, they are incentivised to select higher-quality, more durable clothing, ensuring that rented garments can withstand multiple uses and maintain their appeal over time.

Additionally, repairs were made to extend garment lifespans, with one case showing how local supply chains supported repairs, such as fixing a rented mohair jumper with original yarn from the manufacturer. Our analysis of the Nordic clothing rental market revealed that most companies include additional fees for repairs in their rental terms in case of damage. This suggests an intention to repair items rather than discard them, particularly when it comes to designer clothing and other high-value items rented for special occasions.

However, the analysis of Nordic clothing rental models also showed that while many companies claim sustainability commitments, few of them mention specific practices beyond the rental model, such as sourcing second-hand or surplus garments. This suggests that the full environmental potential of these companies’ sustainability commitments has yet to be realised.

Interviews with members of the pilot company revealed a strong sense of community, where staff and members exchanged compliments, advice, and styling ideas. This supportive environment encouraged members to experiment with new styles and sizes, boosting their confidence. The company further fostered this community by hosting events like “hen parties” and styling salons, creating a sense of belonging that positively influences behaviour. Members often went the extra mile for one another, such as repairing garments or returning items early to benefit the next user. Despite their small scale, these community-driven rental companies have disruptive potential, as they encourage consumers to radically rethink fashion consumption and engage with fashion in a more collaborative and sustainable way.

However, while rental models foster positive social and behavioural change, they can also lead to unintended consequences. Some members acknowledged that their rental memberships allowed them to maintain bad habits of constantly seeking “newness,” which contradicts the sustainability goals of reducing overconsumption. Clothing rental models must – at least to some extent – keep up with fashion trends to consistently offer items that customers want to rent (Bodenheimer et al., 2022). Similar to the challenge of deadstock in traditional fashion retail, rental services face the issue of avoiding "flops," or items that are rarely or never rented. However, some research suggests that excess inventory is less of an issue for clothing rental models than for fashion retailers (Jin & Shin, 2020). Conversely, "hot picks" – highly popular and frequently rented items – can equally pose challenges. Users often expect these popular items to be available when they want them and might lose confidence in the service if this is not the case (Bodenheimer et al., 2022).

However, in the case of Vaatepuu, members appeared less concerned about the availability of specific items. A sense of community enhanced the experience at Vaatepuu fostered through interactions with other members at physical stores, and not merely a transaction between users and the clothing rental company. Additionally, Vaatepuu's founder actively coordinated between members to ensure that specific items were available if someone wanted to rent them for special occasions.

When clothes are rented rather than owned, it can result in increased washing or dry cleaning. Most clothing rental services include a cleaning service after each rental to maintain high hygiene standards. While this feature can make clothing rental more appealing to customers, it may also lead to more frequent washing compared to personal clothing care. Customers might not apply such strict hygiene standards to their own clothes, for example, airing them out after wearing them instead of washing them after each use.

Additionally, companies themselves may experience rebound effects in procurement. For instance, one company was founded by a woman who had accumulated too many unworn dresses, which she then began renting out – a model born from overconsumption (Sayman, 2021).

Another unintended consequence of the rental market is its impact on charity shops. As high-quality garments are kept in circulation through rentals, the availability and value of items for donation decrease, forcing charities to rethink their strategies.

This study identifies two main types of B2C clothing PSS models in the Nordics: membership-based models and one-off rentals, each distinct in terms of product categories, business strategies, consumer engagement, and levels of digitalisation. The pilot company exemplifies the membership-based model, which fosters strong customer retention and community-building, indicating the potential for reshaping consumer relationships with fashion. However, scaling these models while maintaining a sense of community and overcoming barriers such as high subscription costs remains a significant challenge.

The study finds that formal wear retains its value for longer than casual wear, making formal wear a more stable inventory to start a rental business with. It is suggested that casual wear can be added to the selection at a later point.

Despite growing public interest in PSS models, the short lifespan of many businesses highlights underlying financial barriers. These challenges are often linked to gender-related biases and the complexities of circular business models, which can cause hesitation among potential investors. Addressing these issues will require targeted funding opportunities and financial support tailored to the unique needs of circular businesses and female entrepreneurs.

By providing the right financial tools and addressing these structural challenges, the PSS market has the potential to expand, driving more sustainable consumption patterns in the fashion industry.