Innovation Report: Shifting to a Circular Model for Cotton On

This innovation report proposes a shift from the traditional linear model to a circular model for Cotton On, a popular fast-fashion retail brand in Australia. The report highlights the need for the company to address its negative environmental impact and suggests a strategic innovation solution to support recycling and sustainability.

Running head: INNOVATION REPORT
Innovation and Management Decision-Making
[Task 3 – Innovation Report (Cotton on)]
Name of the student:
Name of the university:
Author note:

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Executive summary
The paper recommends an innovation solution to Cotton On, which is a widely popular fast-
fashion retail brand in Australia. The innovation solution is about a shift from the traditional
linear model to a circular model. The proposed solution is expected to support “Cotton On” on
being ethical towards the environment. The study finds that there has not been any promptness
from the company to reduce its negative environmental impact. The suggested innovation
solution can be helpful in supporting the recycling of the used items provided that Cotton On is
able to overcome the resistance as highlighted in this study.

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Table of Contents
1. Outlining the innovation challenge..............................................................................................3
2. Proposing a leading edge strategic innovation solution..............................................................3
3. Applying the strategic innovation model to outline how implementation will take place..........5
3.a The innovation action plan.....................................................................................................5
3.b The leadership........................................................................................................................7
3.c The innovation implementation.............................................................................................9
4. Conclusion.................................................................................................................................11
References......................................................................................................................................12
Appendices....................................................................................................................................14
Appendix 1: My Creative Idea Generation Process:.................................................................14

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1. Outlining the innovation challenge
“Cotton On” is an Australian fast-fashion retail chain, which provides clothing for men,
women, children and teenagers. The company has operations at a global level. It has close to
1,500 stores in 12 different countries. The number of people who work for this company is
approximately equal to 17,000 at both its domestic and international business branches
(Cottonon.com 2019). Like other fast-fashion companies and also like the fashion industry
“Cotton On” struggles to make an impact with its sustainability practice. There are many
sustainability challenges being faced by the company and the fashion industry. These are but not
limited to like sustainable sourcing of raw materials and effective recycling of the used items
(Pedersen, Gwozdz and Hvass 2018). However, for this study, the real focus will be just on
“Recycling of the Used Items”. The purpose of this task is to propose an innovation solution to
“Cotton On” to help them effectively recycle the items. Moreover, by being able to adopt the
proposed innovation solution they will develop an ability needed to shift from the traditional
linear model to a circular model.
2. Proposing a leading edge strategic innovation solution
The problem in focus as faced by Cotton On is not just an issue for the company but to
the entire fashion industry. Cotton On struggles to completely recycle the items. As claimed by
one of its officials, the company has been working on to reduce its contribution to landfill by
increasing the “take back” initiatives (Smh.com.au 2019). Under this initiative, they take back
the used items from their customers. However, they have until now failed to put fibre under the
recyclable process. The company as claimed by one of its officials is in search for a strategic
partner who can provide them assistance on and solution to recycling the fibre (Smh.com.au
2019). The problem as discussed so far can be overcome with an innovation solution, which is

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shifting to a “Circular Model”. Fashion industry unlike many other industries such as the food
industry has so far shown less reactiveness to a circular model. In this section of the study, the
proposed circular model will be discussed in relation to “Cotton On”.
Being a fast-fashion brand, Cotton On produces cheaply made garments in huge quantity.
They are mainly made from cheap and unsustainable materials like viscose, conventional cotton
and polyester. Making garments from these cheap materials also consumes huge energy and
water. Cheap materials are not alone the problem but also the hazardous chemicals that are used
quite commonly. The detrimental impact of these cheap materials and the hazardous chemicals is
not just on the workers, the surrounding air, communities, soil waterways but also on those who
are the end-users (Goodonyou.eco 2019). Additionally, Cotton On does not also publish
sufficient information on their environmental policies (Goodonyou.eco 2019). These pieces of
information just explain that Cotton On as a whole is struggling to practice sustainability policy.
The move related to sustainability as discussed in the above paragraph has been mostly
incompetent. There is a need for a fresh move, which is more robust in addressing the proposed
innovation solution “Adopting a Circular Model”. Cotton On should first identify who all can
make a difference to its sustainability practice. This can be a piece of latest and emerging
technology, stakeholders, leading retailers, etc. There are industry examples to understand how
this need can be fulfilled. The Global Fashion Agenda (GFA) has urged to launch a new
initiative called “The Circular Fibre Initiative” (Fashionunited.uk 2019).
The Ellen MacArthur Foundation in the United Kingdom has shown their interest in this
initiative (Fashionunited.uk 2019). In the course of the action, they are encouraging stakeholders
and industry retailers to collaborate, and together promote a circular economy for textiles. The
list of retailers who have decided to support this initiative includes H&M, C&A Foundation, The

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Danish Fashion Institute, Nike, Cradle to Cradle, Fashion for Good and MISTRA Future Fashion
(Fashionunited.uk 2019). These retailers and respective stakeholders have together decided to
develop a new global system for Fibre. This initiative will adhere to the principles of a circular
economy, and generate growth for both businesses and consumers. This will help to phase out
the negative impacts of producing garments from cheap materials. This initiative aims to catalyse
change across the entire fashion industry by adopting a more practical action. The action will
include creating a fact-based true vision of the global textile industry and adhering to circular
economy principles to positively benefit the economy, environment and society. Dame Ellen
MacArthur who is the founder of Ellen MacArthur Foundation believes that these pieces of
action are required to operate in long-term. A report produced in 2017 together with McKinsey
& Co. maps or identifies how textiles move across the global countries (Fashionunited.uk 2019).
Based on these findings they devised a new and circular economy for textiles, which is
regenerative and restorative.
3. Applying the strategic innovation model to outline how implementation will take place
This section discusses the implementation of the proposed innovation solution “Circular
Model”. This will happen in three distinct stages like devising the action plan, taking note of the
leadership quality and implementing the innovation solution.
3.a The innovation action plan
The innovation action plan can be divided into three distinct types such as the Need for
Innovation, Innovation in Practice and Responding with innovation to challenges. There is a
need for innovation as Cotton On struggles to address the rising urgency towards a circular
economy. Cotton On as found in this study has struggled mostly to meet the ethical standards of

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manufacturing. Instead, they use cheaply sourced materials (Gardetti and Torres 2017). Due to
this, they have not been able to reap the benefits of being ethical. These benefits are but not
limited to higher employee morale, increased capability to attract new customers, ability to build
up higher customer loyalty, ability to create a positive impact on the community and so on
(Gardetti and Torres 2017).
Secondly, Cotton On is already using some innovative strategy like “reutilising the used
clothing from its customers”. However, there is a minimal effort towards the materials being
used to manufacture the garments. Instead, they should have moved to sustainable materials.
According to the Triple Bottom Line for Sustainability Innovations, a business should produce
positive effects on people those who directly and indirectly influenced by it, the country’s
economy and the environment the business operates in (Hammer and Pivo 2017). In addition,
there is a long journey needed to be covered to develop expertise in recycling the garments to
entirely attain sustainability.
Thirdly, there is a need to respond to the challenges as faced by Cotton On with an action
plan that is highly flexible and more robust. The action plan will be devised in a way that it
complements the proposed innovation solution, which is to shift to a Circular Model.
Hence, the action plan will include collaborating with the Ellen MacArthur Foundation to
get access with its fashion circular initiative. By going this way Cotton On will be able to
identify and drive collaboration among key stakeholders. This combined force can be used to
redesign the operating model to be able to follow a circular system. The purpose behind this
collaboration is to promote recycling, reuse and wider practices of a circular economy. However,
the initial focus will be on effectively addressing the “take-make-dispose” model. Cotton On
should focus on bringing together businesses, stakeholders and policymakers to explore how the

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model can be put to an application (Yang, Song and Tong 2017). The collaboration will teach on
how to source sustainable materials, and practice the sustainable strategy both during the
production of garments and post-sale.
Under this collaboration Cotton On should develop an understanding about how to collect
the used items from its customers, what technologies to be used to recycle these items and so on.
Apart from this, they should also be able to use appropriate technology to conduct these pieces of
work in less span of time (Henninger, Alevizou and Oates 2016). A revisit to the supply chain
operations will be required to understand the current operations’ efficiency. Moreover, a new
promotion strategy will be required to facilitate an effective rebranding of Cotton On.
Rebranding alone would not help Cotton On in accessing the used items. Instead, they should be
more into communication with their customers through various social media channels like
Twitter and Facebook. They need to guide their people to these new action lines and develop the
analytical capability to appropriately read their messages, suggestions and feedback on various
social media channels (Borland et al. 2016).
3.b The leadership
The proposed innovation solution will require leadership assistance from the leaders of
Cotton On. The leaders in Cotton On will need to change or modify their leadership skills to be
able to support the recommended innovation solution in a larger context. The leaders will need to
further their technical knowledge to be able to support the innovation solution. This will require
identifying technologies to be able to access wider information on circular economy from across
the globe. The leaders should have the cognitive skills needed to identify the information that
could be important for them. Moreover, they should also know how to use these pieces of
information (Mumford et al. 2017). The proposed innovation solution will promote an

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organisation-wide change. The leaders should have the readiness for this change to be able to
adopt proactive approaches. They should also possess the innovative capabilities required to
understand the importance of an innovation solution.
There are evident differences between term management and leadership. Management
takes care of various operations activities. They may not necessarily adopt a leadership approach
in managing their day-to-day activities. On the contrary, leadership is about possessing and
exploring occasionally various leadership traits. The leadership during a change process will be
different from that under normal business situation (Adams, Keloharju and Knüpfer 2018). The
managers at Cotton On need to think beyond their management capabilities to bring about a
piece of the solution and to be able to execute the recycling of used items.
As identified earlier, Cotton On will need to undergo a change in order to pursue the
recommended circular economy. Now, this change will require leadership assistance from its
managers and support from employees. The leaders at Cotton On will need to change their
leadership style a bit to be able to offer additional input. This is understandable also from the
Contingency Leadership Theory, which says that leaders should not necessarily stick around a
single leadership style but adopt different strategy under certain situations (Nichols 2016).
Leaders at Cotton On are expected to make a difference with their ability to identify useful
technologies and strategies needed to facilitate the recycling of used items.
There will be leadership challenges to the managers at Cotton On. They will be tested for
their decision-making capability (Shapiro and Stefkovich 2016). The situation demands them to
fully cooperate with the proposed circular economy; however, this wouldn’t be an easy task for
them. They had been making profits and were able to drive the fast-fashion business by sourcing
materials at a cheaper cost. Now, to be able to switch to a circular model they will need to stop

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sourcing from cheap suppliers. It is hardly feasible to stop sourcing from global suppliers. They
can go alternatively to collect garments from their customers and recycle the used items.
However, leaders at Cotton On will be tested for their capability to ensure that no single garment
is left to landfill. Instead, they should have the speed to reach to their customers and utilise even
a single garment for recycling (Shapiro and Stefkovich 2016).
Cotton On lacks the leadership approach needed to promote and facilitate the circular
economy. They source cheap materials such as conventional cotton from suppliers. They have
not been able to reduce their energy and water consumption level. Moreover, the manufacturing
process followed at Cotton On produces hazardous chemicals. A change is required to promote
ethical practices across the manufacturing facilities. Moreover, the leaders should also be able to
identify ways following which they will facilitate recycling and reusing of the used items. There
is one suggestion in this regard. An EPR system for clothing should be developed (Romager,
Hughes and Trimble 2017). In this system, the importers and produces have the responsibility to
ensure the post-consumer collection of their items. France is one of the EU countries to have
benefitted from this (Romager, Hughes and Trimble 2017).
3.c The innovation implementation
The leaders at Cotton On will need to identify resistance to the proposed innovation
solution. The possible resistance will be from the stakeholders in the fashion industry. As per a
report, it has been found that customers have little or less contribution in placing their used items
at appropriate places (Shen and Li 2015). This is despite growing publicity for recycling of the
used items on popular social media channels, in popular newspapers, in shopping places, etc. To
be able to implement the recycling programs, the leaders at Cotton On should show reactiveness
in collecting the used items instead of relying entirely on customers to dispose of (Shen and Li

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2015). The implementation of the innovation solution will happen as per the below-mentioned
points (Shen and Li 2015):
Process: The process of implementing the recommended innovation solution will be spread over
four distinct phases. Observing problems is one of the phases. The recycling problem can face
man issues at its various stage. Suppose, it may lack adequate support from the government and
customers. Problem observation will inform on further strategies to be adopted to overcome the
problem and proceed further. The next phase is devising the solution. This is followed by testing
each one of the implemented solutions.
Structure: Organisational structure matters in regards to handling a project or implementing a
change. The organisational structure affects the exchange of communication between individuals
in the workplace. It affects the approval process and the way any task is handled. Cotton On can
continue with their existing structure; however, it is recommended to follow a functional
structure for at least a year and so. The recycling program will involve many approvals and tasks
handling. By following a functional structure quick decisions could be made.
Systems: The implementation will require appropriate systems to be in place. To support
recycling of the used items the use of latest and emerging technology will be of greater
importance. Moreover, Cotton On should also go for the bins to be placed in popular places like
malls, stores and universities. This will provide customers a real-time opportunity to recycle their
used items.
Innovation team: The innovation team will comprise of decision-makers who will be making
decisions under different circumstances and employees who will perform various job roles such
as operating machines, using technology and doing promotion activities.

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Process
Innovation TeamImplementation
Systems
Structure
Observe the Problem, Devise the Solution and Test the Implementation
Figure 1: A Flow Chart
(Source: As created by the author)
The above flow chart shows a complete roadmap to implementing the proposed
innovation solution in Cotton On.
4. Conclusion
To conclude, it can be said that the recommended innovation solution has potentials to
reduce landfill. However, it faces many barriers in the form of leadership in Cotton On,
stakeholder engagement and the national government support. The fast-fashion industry
increasingly relies on cheap materials. It is very difficult to say anything about whether the
suggested innovation solution could be fully implemented.

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References
Adams, R., Keloharju, M. and Knüpfer, S., 2018. Are CEOs born leaders? Lessons from traits of
a million individuals. Journal of Financial Economics, 130(2), pp.392-408.
Borland, H., Ambrosini, V., Lindgreen, A. and Vanhamme, J., 2016. Building theory at the
intersection of ecological sustainability and strategic management. Journal of Business
Ethics, 135(2), pp.293-307.
Cottonon.com 2019. Women's Clothing & Accessories | Cotton On. [online] Cottonon.com.
Available at: https://cottonon.com/AU/women/ [Accessed 18 May 2019].
Fashionunited.uk 2019. Fashion Industry Leaders vow to move towards a Circular System.
[online] Fashionunited.uk. Available at: https://fashionunited.uk/news/fashion/the-fashion-
industry-vows-to-move-towards-a-circular-system/2017051224498 [Accessed 18 May 2019].
Gardetti, M.A. and Torres, A.L., 2017. Sustainability in fashion and textiles: values, design,
production and consumption. Routledge.
Goodonyou.eco 2019. How Ethical Is Cotton On?. [online] Good On You. Available at:
https://goodonyou.eco/how-ethical-is-cotton-2/ [Accessed 18 May 2019].
Hammer, J. and Pivo, G., 2017. The triple bottom line and sustainable economic development
theory and practice. Economic Development Quarterly, 31(1), pp.25-36.
Henninger, C.E., Alevizou, P.J. and Oates, C.J., 2016. What is sustainable fashion?. Journal of
Fashion Marketing and Management: An International Journal, 20(4), pp.400-416.
Mumford, M.D., Todd, E.M., Higgs, C. and McIntosh, T., 2017. Cognitive skills and leadership
performance: The nine critical skills. The Leadership Quarterly, 28(1), pp.24-39.

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Nichols, A.L., 2016. What do people desire in their leaders? The effect of leadership experience
on desired leadership traits. Leadership & Organization Development Journal, 37(5), pp.658-
671.
Pedersen, E.R.G., Gwozdz, W. and Hvass, K.K., 2018. Exploring the relationship between
business model innovation, corporate sustainability, and organisational values within the fashion
industry. Journal of Business Ethics, 149(2), pp.267-284.
Romager, J.A., Hughes, K. and Trimble, J.E., 2017. Personality Traits as Predictors of
Leadership Style Preferences: Investigating the Relationship Between Social Dominance
Orientation and Attitudes Towards Authentic Leaders.
Shapiro, J.P. and Stefkovich, J.A., 2016. Ethical leadership and decision making in education:
Applying theoretical perspectives to complex dilemmas. Routledge.
Shen, B. and Li, Q., 2015. Impacts of returning unsold products in retail outsourcing fashion
supply chain: A sustainability analysis. Sustainability, 7(2), pp.1172-1185.
Smh.com.au 2019. How Cotton On went from a B- to an A by airing dirty laundry. [online] The
Sydney Morning Herald. Available at: https://www.smh.com.au/lifestyle/fashion/how-cotton-on-
went-from-a-b-to-an-a-by-airing-dirty-laundry-20180416-p4z9zd.html [Accessed 18 May 2019].
Yang, S., Song, Y. and Tong, S., 2017. Sustainable retailing in the fashion industry: A systematic
literature review. Sustainability, 9(7), p.1266.

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Appendices
Appendix 1: My Creative Idea Generation Process:

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