Major Retailers Launch Circular Economy Pilots to Combat $890 Billion Returns Waste Crisis
Pilot programs aim to divert millions of pounds of returned merchandise from landfills through resale, refurbishment, and recycling initiatives
NEW YORK, Nov. 19, 2025 – A coalition of leading North American retailers announced today the launch of comprehensive circular economy pilot programs designed to reduce the environmental and financial impact of merchandise returns, which generated 8.4 billion pounds of landfill waste in 2023 alone. The initiative represents a direct response to mounting pressure from consumers, regulators, and investors to address reverse logistics waste.
The scale of the returns crisis has reached critical levels. According to a recent CNBC investigation, retail returns now represent a $890 billion problem for the industry, with processing costs consuming an average of 30 percent of an item’s original price . Research from Ben-Gurion University and ReBound Returns reveals that 44 percent of returned goods never reach another consumer, creating a massive inefficiency in current supply chains. Instead, these items are diverted to landfills, incineration, or simply lost in transit.
The pilot programs, spearheaded by the Retail Sustainability Consortium, will test three core circular models across 150 stores in seven metropolitan markets beginning January 2026. The first model focuses on instant resale integration, where returned items in like-new condition are cleaned, inspected, and placed on dedicated resale floors within 48 hours of return. Early tests show this can recover up to 60 percent of an item’s value compared to the 10 percent recovery rate from traditional liquidation channels.
The second approach involves AI-powered refurbishment networks. The consortium has partnered with regional repair hubs equipped with automated diagnostics and fabric restoration technology. This system will triage returned apparel and electronics, routing repairable items to local technicians and non-repairable products to material recovery facilities. The initiative addresses a critical gap identified by industry analysts: less than 1 percent of clothing collected through traditional take-back programs is actually transformed into new garments due to inadequate sorting infrastructure.
The third pillar targets packaging waste reduction through a borrow-and-return container system. Modeled after successful pilots in Europe, customers can opt for reusable packaging with a refundable deposit, eliminating single-use boxes from the returns process. Each reusable container is designed to withstand 30 cycles and features embedded RFID tracking to optimize reverse logistics routing.
“For too long, returns have been treated as a cost center to be minimized rather than a resource to be captured,” said Margaret Chen, Chief Sustainability Officer of the Retail Sustainability Consortium and former VP of Operations at Target. “These pilots prove we can transform a $890 billion liability into a circular asset that cuts waste, reduces carbon emissions, and creates new revenue streams. The technology exists; what we need now is coordinated industry action.”
The initiative arrives as 81 percent of U.S. retailers implemented stricter return policies in 2023, including shortened windows and restocking fees, yet waste volumes continued climbing. Industry data indicates that returns generate 24 million metric tons of CO2 emissions annually from transportation alone, with fashion e-commerce experiencing return rates up to 40 percent—three times higher than brick-and-mortar averages.
The consortium has committed $45 million to the 18-month pilot, with funding from participating retailers and matching grants from the Environmental Protection Agency’s Sustainable Materials Management program. Participating companies include major department stores, fashion brands, Retailers Launch Circular-Economy Pilots to Cut Returns Waste and consumer electronics retailers, though specific names will be disclosed following Q4 earnings releases.
Preliminary modeling suggests that if scaled nationally, circular returns management could divert 2.1 billion pounds of merchandise from landfills annually while generating $12 billion in incremental revenue through resale channels. The pilots will track key metrics including carbon footprint reduction, customer satisfaction scores, and gross margin recovery rates, with results published quarterly in partnership with the MIT Center for Transportation & Logistics.
About the Retail Sustainability Consortium
The Retail Sustainability Consortium is an industry collaboration of 35 major retailers representing over $400 billion in annual revenue, dedicated to developing scalable solutions for environmental challenges facing the retail sector. Founded in 2023, the consortium focuses on decarbonization, waste reduction, and circular economy innovation. Members include leading brands from apparel, home goods, electronics, and department store categories. For more information.
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