The impact of collaboration on sustainability and profit in the fashion rental supply chain

The global fashion industry is under increased scrutiny for its environmental and social impacts and therefore compelled to innovate towards more sustainable models. Some of the more notable initiatives are moving from a traditional consumer-ownership-based model to a consumer-use-based model and collaborating with key supply chain stakeholders to achieve higher levels of sustainability. Though collaboration is perceived to be an enabler and is vital for sustainable development, many collaborative efforts have failed because the effects of collaboration on sustainability and the associated trade-offs remain unclear. This paper aims to contribute to this context by clarifying the effects of collaboration levels on the degree of sustainability practices for producing fashion items. Specifically, we investigate a two-echelon fashion supply chain, comprising a supplier and a fashion rental retailer through analytical modeling. The supplier decides on the sustainability level and the selling price to the retailer, while the retailer decides on the order quantity. Given the rising demand for environmentally friendly products, consumer demand for renting fashion items is assumed to increase with the degree of sustainability practices adopted. The findings show that a higher level of collaboration enhances overall sustainability and at the same time improves profitability. Furthermore, the research demonstrates that a higher level of collaboration can mitigate the negative effect on profitability resulting from the need to adhere to minimum sustainability thresholds, possibly mandated by regulators. Based on the findings, actionable insights for practitioners, policymakers, and regulators are outlined.