Co‐Creating Circular Pathways in the Fashion Industry: A Participatory System Dynamics Perspective

Circular economy transitions in the fashion industry are frequently constrained not by a lack of reinforcing drivers but by endogenous feedback structures that limit growth as systems expand. Focusing on the Brazil context, this study identifies the dominant feedback archetypes governing circular transitions across four distinct socio‐technical contexts, namely, fashion brands, consumers, micro‐businesses, and digital circular platforms and offers an explanation, grounded in a participatory system dynamics approach, for why circular initiatives stall or progress. A participatory approach was adopted, combining co‐created causal loop diagrams, group model building, and backcasting workshops targeting a shared 2030 circular economy scenario, actively engaging 20 heterogeneous stakeholders including fashion brands, waste picker cooperatives, local government officials, and academics. Four causal loop diagrams were developed and validated through recorded and transcribed stakeholder interviews. The results identify a dominant limits to growth archetype across all four contexts, each driven by a distinct limiting mechanism: margin erosion in fashion brands, price‐mediated adoption constraints in consumer markets, infrastructure and workforce deficits in micro‐business recycling systems, and a dual operational and financial constraint in digital circular platforms. By structurally mapping reinforcing drivers, limiting feedbacks, and generic solutions onto four empirically grounded causal loop diagrams, this study contributes to the understanding of circular economy transitions as feedback‐driven processes and offers context‐specific leverage points for firms, cooperatives, and policymakers seeking to design more durable and coordinated circular strategies in comparable settings.