SocioeconomicImpactofSecond-Hand

ClothesTHESOCIO-ECONOMICIMPACTOFSECOND-HANDCLOTHESIN

AFRICAANDTHE

EU27+REPORTFORHUMANAPEOPLETOPEOPLEAND

SYMPANY+FINAL

REPORTOCTOBER

2024SocioeconomicImpactofSecond-Hand

ClothesABOUTOXFORD

ECONOMICSOxfordEconomicswasfoundedin1981asacommercialventurewithOxfordUniversity’sbusinesscollegetoprovideeconomicforecastingandmodellingtoUKcompaniesandfinancialinstitutionsexpandingabroad.Sincethen,wehavebecomeoneoftheworld’sforemostindependentglobaladvisoryfirms,providingreports,forecasts,andanalyticaltoolsonmorethan200

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jneuhoff@OxfordEconomics4Millbank,LondonSW1P3JA,UKTel:+49698088

3016SocioeconomicImpactofSecond-Hand

ClothesTABLEOF

CONTENTS2GlossaryAbbreviationsAcknowledgmentsExecutive

Summaryiiiiiv1112779132123293237373840455050598085859194IntroductionMotivationandBackgroundMethodological

OverviewTheSHCValueChainOverviewofthetypicalSHCvalue

chainCollectionof

TextilesSortingandClassificationof

TextilesRetailinthe

EU27+ImportandWholesaleinAfricaFormalRetailinAfricaInformalRetailandMarketTradeinAfricaSHCTradebetweenAfricaandthe

EU27+Globaltradein

SHCExportsfromthe

EU27+ClothingimportsinGhana,Kenya,and

MozambiqueDiscussionoftradeimpactsonthelocaleconomyintheGlobal

SouthSocioeconomicImpactofSHC

tradeImpactintheEU27+ImpactinThreeSelectedAfrican

CountriesEnvironmentalImpactsof

SHCPolicySpacefor

SHCRelevantPoliciesandObjectivesintheGlobal

NorthRelevantPoliciesandObjectivesintheGlobal

SouthOtherPolicyGoalsintheInternational

ArenaSocioeconomicImpactofSecond-Hand

Clothes5.4.SummarisedcontributionsoftheSHCtooverallpolicy

goalsSWOT

AnalysisSHCIndustryintheGlobal

NorthSHCIndustryintheGlobal

SouthPolicyRecommendationsPolicymakersBusinesses/not-for-profitorganisations3979999107115115117120130BibliographyAppendix:Detailed

MethodologySocioeconomicImpactofSecond-HandClothes

|GlossaryGLOSSARY1Circulareconomy:Modelofproductionandconsumptionwhichemphasisessharing,reusing,repairing,refurbishing,andrecyclingofexistingmaterialsandproducts.Inthisway,thelifecycleofproductsisextended,wasteisreduced,andtheuseofrawmaterialsisminimised.Thecirculareconomymodelcanbecontrastedwiththetraditionallineareconomicmodel,basedonthetake-make-consume-throwaway

pattern.Digitalproductpassport:adigitalrepresentationofaproduct’sinformationthroughoutits

lifecycle,fromcradleto

grave.Economicimpactassessment:astudythatmeasures/estimatestheeconomicactivityproducedbyasingleorganisation/policy/program/project,andconsiderstheimpactontheoveralleconomy,employment,andhousehold

income.GlobalNorth:Therichestandmostindustrialisedcountries,whicharemainlyinthenorthernpartoftheworld.Inthisreport,theGlobalNorthoftenreferstothecountriesofthe

EU27+.GlobalSouth:Thelesseconomicallyadvancedandindustrialisedcountries,whicharemainlyinthesouthernpartoftheworld.Inthisreport,theGlobalSouthoftenreferstothestudiedAfricancountriesofGhana,Kenya,and

Mozambique.Greenjobs:Alljobswithinagreenindustry,followingtheindustry-baseddefinitionoftheUK’s

OfficeforNational

Statistics.GrossDomesticProduct(GDP):GDPisthemonetaryvalueofallfinishedgoodsandservicesmadewithinacountryduringaspecificperiod;itdiffersfromGVAinthatitprovidesanoverarchingviewofthewholeeconomy.GDPisobtainedbyadjustingtaxesandsubtractingsubsidiesonproductstoGVA.GrossValueAdded(GVA):GVAisameasurethatquantifiesthevaluecreatedthroughvalue-addingactivities.Itiscalculatedasthedifferencebetweenthevalueofoutputofgoodsandservicesandthevalueofinputsusedintheirproduction.GVAcanbemeasuredatdifferentlevels,e.g.atthelevelofanindividualproducer,aparticularindustry,acountry,etc.Atcountrylevel,GVAplustaxesonproductslesssubsidiesonproductsequals

GDP.“Kayayei”:aGhanaiantermforafemaleporterorbearerwhotransportsgoodstoandfromthemarket.Mechanicalrecyclingoftextiles:Processofbreakingdownusedordiscardedfabricintoitsfibrousformthroughphysicalmethodssuchasshredding,tearing,orcarding,withoutalteringthechemicalstructureofthematerial.Not-for-profitorganisations:Organisationswhoseactivitiesareaimedatapublicorsocialbenefitratherthangeneratingprofitsforindividualsor

shareholders.PolluterPaysPrinciple:oneofthekeyprinciplesoftheEU’senvironmentalpolicythatstatespollutersshouldpayforthecostoftheirpollution.Theprincipleisbasedonmanyinternationalenvironmentallaws,anditcontributespositivelytoreducing

pollution.SocioeconomicImpactofSecond-HandClothes

|Glossary(Post-sorting)Textilewaste:Disposedclothesorothertextilesthathavebeendeemedunsuitableforrecyclingorreusebyaprofessional

sorter.Priceelasticity:ameasurementonhowmuchconsumersreacttoachangeinpricesofgoodsandservices.Althoughtherearetwotypesofpriceelasticity(demandandsupply),thisreportchieflyconsidersthepriceelasticityofdemand.Ifdemandishighlyprice-elastic,thismeansthatasmallchangeinpricescorrespondstoalargechangeindemand,andvice

versa.Second-roundsorting/categorisation:Furthercategorisationofsecond-handclothinginsortingcentresintheGlobalSouth.Thismightincludethebreakingupoflargeimportbales,theclassificationofclothingintodesignated,demand-specificcategories(e.g.pants,women’st-shirts,etc.),andtherepackagingintosmaller

bales.SHCcompanies:Commercialandnot-for-profitorganisationswhoseprimarybusinessactivitiesinvolveoperationswithinthesecond-handclothingindustry,includingthecollection,sorting,wholesaledistribution,orretailsaleofsecond-hand

clothes.Socioeconomicimpact:Thecombinationofsocialandeconomicimpact.Theeconomicimpactincludesthevalue-addedimpact,whilethesocialimpactconcentrateson

employment.Sorting:Themulti-stepprocessinwhichtextilewasteisassessedtodetermineitssubsequentuse(orfinaldisposal).Thisprocessincludesboththesortingofcollectedtextilewasteintooneofthreemaincategories—(1)reusabletextiles,(2)recyclabletextiles,and(3)(post-sorting)textilewaste—correspondingtothewastehierarchy,aswellassubsequentmoregranularsortingstepswithinthesemaincategories.Textilerecycling:Processofrecoveringfibre,yarn,orfabricfromtextiles,andreprocessingmaterialintonew,useful

products.Textilereuse:Reuseofdiscardedtextiles(e.g.clothes)eitherintheconditioninwhichtheyare,oraftermodification(repairments,restyling,etc.);second-handclothes(SHC)arearesultoftextile

reuse.(Unsorted)Textilewaste:Alldisposedclothesorothertextiles(rags,blankets,cloths,etc.)thathavenot(yet)undergoneasortingoperationbyaprofessionallytrainedsortercountastextilewaste.ThisdefinitionfollowstheexpectedrevisiontotheWasteFrameworkDirectivewhichinitiallyclassifiesallcollectedusedtextilesaswaste.Textilewastedoesnotnecessarilylackeconomicvaluenorendupinlandfills/incinerationplants,

etc.Value-addingactivity:Avalue-addingactivityisanactivitythatincreasestheeconomicvalueofaproductorservice.Forexample,textilesortingisavalue-addingactivityassortedtextileshaveahighereconomicvaluethannon-sortedtextiles/textile

waste.Wastehierarchy:ThefoundationofEUwastemanagement,establishedintheWasteFrameworkDirective.Itestablishesafive-steporderofpreferenceforwastemanagement,namely(1)wasteprevention,(2)preparingforre-use,(3)recycling,(4)recovery,and(5)disposal,with(1)beingthemostpreferredand(5)theleastpreferredwastemanagement

option.2SocioeconomicImpactofSecond-HandClothes

|AbbreviationsABBREVIATIONS3ADPPAfCFTAAGOAAMCENCEAPCIFEACEPRESPREU27+FOBGDPGEAPGHSGSMGVAKEBSKESMDGMZNNDCNGOPPPSDGSHCSWOTUAEUNUNGAVATWSRWTOAjudadeDesenvolvimentodePovoparaPovoAfricanContinentalFreeTrade

AreaAfricanGrowthandOpportunity

ActAfricanMinisterialConferenceontheEnvironmentCircularEconomyAction

Plancost,insurance,and

freightEastAfricanCommunityExtendedProducer

ResponsibilityEcodesignforSustainableProductsRegulationEuropeanUnionplustheUnitedKingdomfreeonboardGrossDomesticProductGreenEconomyActionPlanGhana-CediGlobalSustainabilityModelGrossvalue

addedKenyaBureauofStandardsKenyan

ShillingMilleniumDevelopment

GoalsMozambicanmeticalNationallyDetermined

ContributionNon-governmentorganisationPolluterPaysPrincipleSustainableDevelopmentGoalsSecond-hand

Clothes/ClothingStrengths,Weaknesses,Opportunities,andThreatsUnitedArab

EmiratesUnitedNationsUnitedNationsGeneralAssemblyValue-addedtaxWasteShipmentsRegulationWorldTrade

OrganizationSocioeconomicImpactofSecond-HandClothes

|AcknowledgmentsACKNOWLEDGMENTS4Wewouldliketoexpressoursincereappreciationtoalltheexpertsandstakeholderswhocontributedtheirtimeandinsightsthroughoutthevariousstagesofthisresearch.Yourparticipationintheexploratoryinterviews,expertinterviews,datavalidationworkshops,andon-siteinterviewshasbeeninstrumentalinrefiningouranalysisandenhancingtheoverallqualityofthis

study.SocioeconomicImpactofSecond-HandClothes|Executive

SummaryEXECUTIVE

SUMMARYThesecond-handclothing(SHC)industrydoesnotonlysignificantlyreducetheenvironmentalimpactoftextileproductionbutalsohasanunderexploredsocioeconomicimpact.Bypromotinggarmentreuse,extendingapparellifespans,andloweringthedemandfornewtextiles,theSHCindustryplaysapivotalroleinreducingtheenvironmentalimpactoftextileproduction.Theindustrysignificantlylessenstheenvironmentalfootprintofclothingitems,withreusedtextilesrequiringjust0.01%ofwaterandsavingabout3kgofCO2peritemcomparedtotheproductionofnewclothing(EuropeanRecyclingIndustries'Confederation,2023).Lessexplored,arethecontributionsoftheSHCsectortoeconomicvalue,employment,andamoresustainableandinclusiveglobal

economy.Thisreport,commissionedbyHumanaPeopletoPeopleandSympany+,aimstoquantifythesocioeconomicimpactsoftheSHCindustry.Morespecifically,itanalysesthesocioeconomicimpactoftheSHCindustryintheEuropeanUnionandtheUnitedKingdom(EU27+),aswellasinthreeselectedAfricancountries:Ghana,Kenya,andMozambique.Utilisingacomprehensivemulti-methodapproach—includingliteraturereview,expertinterviews,quantitativesurveys,tradedataanalysis,andqualitativefieldwork—thestudyoffersanin-depthunderstandingofthevaluechain,itssocioeconomicimpacts,andthepoliciesshapingthe

industry.VALUECHAINOFTHESHC

INDUSTRYThevaluechainoftheSHCindustryinvolvesseveralkeystages,startingwithcollectionandmovingthroughsorting,wholesale,retail,andultimately,consumerpurchase.Initially,clothesarediscardedbyindividualsintheGlobalNorth

atvariouscollectionpointsmanagedbySHCcompanies,includingcommercialandnot-for-profitorganisations.Thesecompaniescollectusedtextilesthroughdifferentcontractingmechanisms,whichincludeeconomictransactionssuchasfeespaidtomunicipalities,andultimatelysellthecollectedtextilestodedicatedsortingcompanies.Thecollectedclothingservesasthefeedstockfortheindustry,fuellingallsubsequentprocesses.Inthefollowingsorting

stage,itemsundergometiculouscategorisationbasedontheirpotentialforreuse,recycling,ordisposalaligningwiththewastehierarchy.SortingcentresintheEU27+typicallyidentifyfourmaincategories:clothessuitableforretailinEurope,thosedestinedformarketsintheGlobalSouth,textilesthatarenon-reusableandearmarkedforrecycling,andclothesthatcannotbe

repurposed.Followingthesortingstage,reusableclothesareeithersoldwithintheEU27+orshippedtotheGlobalSouth.IntheEU27+,second-handitemsareretailedthroughvariousoutlets,includingcommercialretailshopsandnot-for-profitorganisations,cateringtoadiverserangeofconsumerpreferencesandpricepoints.IntheGlobalSouth,thesortedclothingisboughtandimportedbywholesalers,whomayfurthercategorisetheitemsbytypeandqualitytomeetspecificcustomerdemands.Wholesalersplayacrucialroleindistributingbalesofclothestobothformalretailshopsandinformalmarkettraders,whoareultimatelyresponsibleforensuringthatindividualclothingitemsreachconsumers.Incontrasttocommonbelief,everystepinvolvesfinancialtransactionssuchaspayingworkers,buying,andsellingclothes,andcoveringshipment

costs.1SocioeconomicImpactofSecond-HandClothes|Executive

SummaryInmanycountriesintheGlobalSouth,includingGhana,Kenya,andMozambique,theinformalretailmarketisparticularlysignificant.Itoftensellssubstantiallymoreclothesthanitsformalcounterpart.Informalretailerspurchaseclothingbalesfromwholesalersandindividualpiecesfromformalretailers,andthenconductawidearrayofbusinessactivitiessuchaswashing,ironing,andrestylingclothestoenhancetheirmarketvalue.Otherinformalretailersalsoactastailorsandrepairers,providingadditionalvaluetolower-qualityclothes.Additionally,informaltradersplayanimportantroleindistributingclothestoremoteareas,

ensuringaccessibilitytoaffordableclothingforabroader

population.SHCTRADEBETWEENTHEEU27+ANDGHANA,KENYA,AND

MOZAMBIQUEIn2023,theEU27+maintainedaleadingpositionintheglobalSHCtrade,exporting2.2milliontonnesvaluedat$2.2billion.Atthesametime,theEU27+onlyimported751,620tonnes

worth$923million.TheUnitedKingdom(UK)isthethird-largestglobalexporter,followingtheUnited

States(US)andChina.MajorEuropeanUnion(EU)exportersincludeGermany,theNetherlands,Poland,andItaly.Notably,muchoftheSHCexportedfromtheEU27+remainswithinthecontinentalboundaries,withsomecountriesfunctioningasintermediariesthatsortandre-export

SHC.TheEU27+isanimportantsourceofSHCforthethreeAfricancountriesselectedinthisstudy.Forinstance,theEU27+directlysupplied47%ofGhana’sSHCimportsin2023.DirectimportsfromtheEU27+makeupasmallershareofimportsinKenya(13%)andMozambique(18%).However,thetotalEU27+impactonthecountriesSHC’simportsmightbe

higher.Intermediarycountries,suchastheUnitedArabEmirates(UAE)andPakistan,alsosortandprocessSHCcollectedintheEU27+,andaresomeofthetopsupplyingmarketsfortheGlobal

South.WhileSHCimportsfromtheEU27+

becameincreasinglyimportanttoGhana,thevolumeofdirectEU27+importsinKenyaandMozambiquedeclined.In2023alone,Ghanaimported53,970tonnesofSHCvaluedat$44millionfromtheEU27+,withthevolumeofclothingimportedhavingincreasedby6%,andthevalueofimportsgrowingby28%overthelastdecade.Incontrast,Kenya'simportsofSHCfromtheEU27+declinedsignificantlyby2023,droppingto$26millionor25,430tonnes,adecreaseof36%and40%,respectively,since2013.Despitethis,theoverallvolumeofSHCimportsintoKenyanearlydoubledoverthedecade,drivenbysubstantialincreasesinimportsfromChina,Pakistan,theUS,andtheUAE.Meanwhile,MozambiqueexperiencedasharpdeclineintotalSHCimportsoverthesameperiod.By2023,exportsfromtheEU27+toMozambiquedeclinedfrom19,736tonnes($21million)to7,600tonnes,valuedat$7.6million—a61%reductioninvolumeanda64%reductionin

value.Over

80%ofsecond-handclothesimportedfromtheEU27+

inGhana,Kenya,

andMozambiqueweresoldininformalmarketsin

202347%,13%,and

18%ofSHCimportsinGhana,Kenya,and

Mozambiqueoriginateddirectlyfromthe

EU27+in

20232SocioeconomicImpactofSecond-HandClothes|Executive

SummarySHCtradefromtheGlobalNorthtotheGlobalSouthhasspurredpolicychangesinAfricancountriestoprotectlocaltextileindustries,yettheseeffortshavelargelyfailedtobenefitlocaltextilemanufacturing.ThesubstantialSHCtradefromtheGlobalNorthtotheGlobalSouthhasraisedconcernsaboutitsnegativeimpactonlocaltextileindustries,promptingpolicychangesinAfricancountries.Forexample,theEastAfricanCommunity(EAC)initiallyagreedtobanallSHCimportsby2019toprotectandexpandthelocaltextileindustry.However,Kenyawithdrewfromthisinitiativetoprotectitsexport-orientedclothingmanufacturingindustry,whichbenefitsfromtheAfricanGrowthandOpportunityAct(AGOA)tradeagreement.OthercountrieshavetakensimilarinitiativestorestrictSHCimports.Overall,SHCimportbansdidnotsignificantlybenefitlocaltextilemanufacturing.Withlocalproductionbeingmoreexpensive,largepartsofthepopulationdemandingaffordableclothingmaysubstitutesecond-handitemswithcheapnewclothingimportsratherthanpurchasingfromthelocalindustry.Moreover,factorssuchasrelyingonimportedfabricsandlackofinvestment,combinedwithcompetitionfromcheapnewclothingimports,makeitdifficultforthelocalindustrytomeetdomesticmarketneedsevenintheabsenceofsecond-hand

imports.SOCIOECONOMICIMPACTINTHE

EU27+IntheEU27+,theSHCindustryhasasubstantialdirectsocioeconomicimpact.In2023,itcontributed€3.0billiontotheregion'sGrossDomesticProduct(GDP)in2023.Thiscontributionissplitbetweenprofits(€700million)andcompensationofemployees(€2.3billion).Theretailsectoraccountsfor62%ofthisgrossvalueadded(GVA),followedbysortingandcollectioncompanieseachcontributing19%.KeycountriessuchasGermanyandtheUKbenefitsignificantly,withtheindustrycontributing€670million

and€420million,respectively,totheGDPsofthesenationsalone.Additionally,theindustrygeneratessignificantemploymentintheEU27+,withanestimated110,000jobs.1Mostof

thesejobs,around67,000,areprovidedbyretailstores,whilesortingfacilitiesemploy35,000individuals,andcollectionactivitiesaccountfor11,000jobs.Importantly,withtheindustryfacilitatingthecollectionoftextilewasteandthesortingofrecyclableandreusablematerialsfromwastestreams,theindustrycreatesgreenjobsforits

employees.ThetotaleconomiccontributionoftheSHCindustryintheEU27+farexceedsitsdirectimpact.Beyonditsdirectoperationsincollection,sorting,andretail,theindustryalsostimulatesconsiderableeconomicactivitythroughitssupplychainspending(indirecteffect)andthewage-inducedconsumptionspendingofemployees(inducedeffect).In2023,theindustrysupportedanestimatedtotalcontributionof€7.0billiontoGDPintheEU27+,equivalentto10%ofLithuania’sGDPthatyear.Similarly,theindustryalsosupportedanother40,000jobsthroughtheindirectandinducedchannelsofimpact.Thus,thetotalemploymentstimulatedbytheindustryintheEU27+wasaround150,000jobsin2023.1Throughoutthisreport,totalsmaynotaddupdueto

rounding.110,000green

jobscreatedbytheSHCindustryintheEU27+in

2023.3SocioeconomicImpactofSecond-HandClothes|Executive

SummaryMoreover,theSHCindustrygeneratedconsiderablywidersocioeconomicimpactsintheEU27+.InEUcountries,theaveragegrossincomeoftheindustry’semployeesineachcountrywas,onaverage,around12%higherthantherespectivenationalminimumwage.Moreover,theindustrygeneratedsubstantialjobopportunitiesinlesseconomicallydevelopedregionsoftheEU27+—includingBulgaria,Romania,andPoland,wherearound22,000workerswereemployedintheSHCindustry.TheEuropeanSHCindustryalsofostersequal-paidfemaleemploymentopportunities,withwomenmakinguparound79%ofitsworkforceandnoreporteddifferenceinpaybetweenmenandwomen.Moreover,77%oftheindustry’semployeeshaveabasic/intermediateeducationalbackground(e.g.lowersecondaryschool,highersecondaryschool),comparedto60%intheoverallworkforceoftheEU27+.ThishighlightsthattheSHCindustryprovidesaccessiblejobopportunitiesforwhichtheformaleducationrequirementsarerather

modest.SOCIOECONOMICIMPACTINGHANA,KENYA,AND

MOZAMBIQUEThesocioeconomicimpactofSHCtradebetweentheEU27+andGhana,Kenya,andMozambiquealsogeneratedsubstantialeconomicimpactsinthethreeAfricancountries.InGhana,thedirecteconomicimpactofSHCimportsfromtheEU27+wassubstantial,withanestimatedcontributionof$35milliontothecountry'sGDPin2023.Thisimpactisprimarilydrivenbysalariesandwagespaidtoemployees,accountingfor71%ofthedirectGDPcontribution.Theindustryalsocreatedapproximately14,000formaljobsthroughtheimportofSHCfromtheEU27+.Similarly,theSHCtradebetweenKenyaandtheEU27+providedadirectGDPcontributionofaround$9.2millionandsupportedapproximately3,600formaljobs.InMozambique,weestimateadirectGDPcontributionof$2.7million,drivenlargelybyhighsalariesandwagespaidtotheindustry'semployees.Theindustryalsocreatedabout1,000formaljobswithintheSHCsectorbyimportingusedclothesfromthe

EU27+.ThetotaleconomicimpactofEU27+SHCimportsinthethreeAfricancountriesstudiedextendsbeyonddirectcontributionsbystimulatingeconomicactivitiesthroughsupplychainandwage-fundedconsumptionspending.InGhana,thetotalsocioeconomiccontributionoftheseimportsacrossallthreechannelsofimpactwasapproximately$76millionand22,000formal

jobs.Consequently,theindustrystimulatedaGDP

multipliereffectof2.2,witheachDollarinGVAgeneratinganadditional$1.20elsewhereintheeconomy.SimilarpatternswereobservedinKenyaandMozambique,wheretheSHCtradewiththeEU27+stimulatedGVAof$24millionand6,300formaljobsinKenya,and€11million

inGVAand5,700formaljobsinMozambique,throughtheindustry’sdirectimpact,procurement,andthewage-financedconsumptionspendingofemployees.ThetaxrevenuesfromSHCtradewiththeEU27+inthesecountrieswerealsonoteworthy,stimulatingbetween0.1%and0.4%ofthetotalnationaltaxrevenuesacrossallchannelsofimpactin2023.ThisincludedsubstantialimportdutiesandValue-addedTax(VAT)collections,highlightingthesector'scriticalroleinsupportinggovernmentrevenues.$110

millioncombinedtotalgrossvalueaddedcontributionsinGhana,Kenya,andMozambiquesustainedbySHCtrade

withthe

EU27+.4SocioeconomicImpactofSecond-HandClothes|Executive

SummaryTheSHCindustryinthethreeAfricancountriesisstronglycharacterisedbyitsinformality,withmostemploymentbeingcreatedthroughinformalmarkettradersanditsemployees.WeestimatethattheSHCtradewiththeEU27+generatedjobsfor43,