The world’s biggest textile-to-textile recycler, based on volume, Sweden-based Renewcell filed for bankruptcy on February 25. But the story of its demise started much earlier and points to wider issues within the fashion industry and its lack of readiness to tackle post-consumer material innovation.
Renewcell’s business model was based on taking in discarded clothing and cotton from brands and turning it into Circulose, which could then be used to make new clothing items. The company had large clients, including H&M, Inditex, Levi’s, PVH and Bestseller, to which it supplied its Circulose from the items that the brands sent in. Apart from PR statements, none of the brands agreed to comment on this story. In most recent developments, as of March 6, H&M is now launching its own textile-to-textile recycler called Syre, with manufacturing set to take place in the U.S.
Renewcell was founded in 2012 and got its big break in 2019 when it became the first commercially available company doing textile-to-textile recycling. It IPO’ed in November of 2020, and that is where many of its problems began, according to industry sources.
“The business structure was inherently flawed,” said Michelle Gabriel, sustainable fashion strategist and professor at the Glasgow Caledonian New York College. “From a business fiscal responsibility perspective, Renewcell should have never been a public company. It made every misstep a public misstep. And in an early-stage, high-investment business, that does them no favors whatsoever. That’s why we allow companies in other sectors the flexibility of quiet investment while they sort out their business with a long-term goal of 10-15 years of ROI.”
Renewcell opened the first-ever industrial-scale chemical textile-to-textile recycling facility in November 2022, in Sundsvall, Sweden. The company allocated $91 million for this investment in 2021, according to its earnings statement.
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The shift from success to its current position started in the fall of 2023. “It was October 13 when the stock market went down, and then on November 20, the board asked for a strategic review,” said Tricia Carey, chief commercial officer at Renewcell. “Then on December 20, we received three months of additional funding. So all these were clear red light flashes of what was happening.” The company went through layoffs in January, letting go 25-30 people.
With the bankruptcy, the board was absolved, the CEO was removed, and then the business administrator came in to make decisions for the company on behalf of the banks, according to Carey. “The administrator decided to then proceed with selling the entire plant, with the hopes of finding an investor who would continue to run the plant,” she said. The company has until March 15 to take bids, then, if a sale is made, it must settle the sale by the end of March and complete the paperwork within six months.
For now, the companies working with Renewcell’s materials have enough stock on hand to maintain production. “Our fiber producers have about 4,000 tonnes of fiber, and there’s about 12,000 tonnes of pulp that exists,” said Carey. “So that’s equivalent to 40,000 tonnes of fiber. It’s enough to last the market for at least 18-24 months, based on projections. So we want to encourage the market to continue developing items that use Circulose.”
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“In the short term, we will be less affected by the bankruptcy — we still intend to launch all planned Renewcell products this year, because we have secured the necessary materials,” said Nikolaj Reffstrup, founder of Ganni. “Perhaps we will see a bigger partner come in and buy up assets. In the longer term, we need to look at how we assess our innovator partners, in terms of their risk of bankruptcy and their scalability.”
Mara Hoffman was also in talks with Renewcell to implement its material at a later date when Renewcell was set to begin offering 100% recycled material. Currently, most Circulose fiber blends are 30% Circulose pulp, 70% wood pulp or 50/50. All 3 of Renewcell’s main fiber producers, which include Birla, Sanyou and Yibin Grace are working to create viscose made from 100% Circulose pulp, set to be available in 2025. “We’re strategic when we bring any type of innovation like this into our collection, to ensure it’s not just a capsule collection, that it can be part of the way we approach all collections,” said Dana Davis, Mara Hoffman’s vp of sustainability.
Renewcell has received an outpouring of support since its bankruptcy announcement, Carey said. “We got the ‘How can I help?’ message through many different routes,” said Carey. “Our suppliers in Turkey have started a petition because they wanted to have that visibility to any potential buyer that they believe strongly in what we’re doing and in using Circulose.”
Among factors, Carey owed the company’s downward trajectory to a lack of sector diversification. “We didn’t have enough fiber to go into markets beyond fashion,” said Carey. “We relied on five key brands. When you’re limited with materials, that creates problems.”
“The companies that were making uptake commitments related to raw materials were not keeping to those commitments,” said Gabriel, talking about Renewcell’s brand partners. “Renewcell had only so many clients that could fully tackle [the issue]. Renewcell could have pursued [legal action against the partners failing to meet their Renewcell agreements], but there’s a financial and goodwill cost.”
Renewcell is now looking to the home goods, paper and packaging industries to bring in more materials for its cellulose inventory. “A market mix would be ideal, to have some keep the factory running off a [variety of] markets that are geographically closer or easier and quicker to develop,” said Carey.
“But we still see the need for textile-to-textile recycling in apparel textiles because of the EPR regulation that’s coming into effect,” she said. Extended Producer Responsibility is an environmental policy approach that shifts the responsibility of a product’s lifecycle to the producer, including its design, take-back, recycling and final disposal.
Regulation has shed light on the need for these material alternatives. But in the last week, E.U. supply chain due diligence laws have been blocked. “Being the first textile-to-textile recycler, are we almost a little too early,” said Carey. “We don’t have the proper infrastructure, transition funds and policy subsidies, and the legislation-led incentives are not set up yet. So we’re left out there on our own to make it work.”
Davis said there remains a disparity between the day-to-day operations of fashion brands and the looming legislation. “Brands are struggling with even understanding the impacts of this legislation. Everyone’s still siloed within their day-to-day work and focused on the commitments they’ve made and how they’re going to get there,” said Davis. “Considering the many brands that rely on man-made cellulosic fibers, it seems a little shocking that [Renewcell] couldn’t reach [its minimum quantities for incoming textiles] within the timespan they were hoping for.” Man-made cellulosic fibers, which are most commonly derived from wood, account for the third-largest share of global fiber production after polyester.
The other issues for Renewcell came down to preparing the brands for what was going to be needed in the textile-to-textile recycling process, and how the waste clothing would need to be provided. “We also didn’t discuss, ‘How are you going to transition from using Renewcell materials in a capsule to using them in your main line? What process is needed? Is there the right funding internally to support this?’” said Carey.
“Coming from tech, I am not surprised to see projects like Mylo and Renewcell fail, as it happens in the startup world all the time,” said Reffstrup. “We just need to ensure the industry doesn’t shy away from new attempts at sustainability and material innovation because we desperately need the innovation to continue, and the funding of it.”
Thus far, the investor landscape has not shifted away from material innovation. “Investors are still extremely interested,” said Davis. “The challenges come in investors not fully understanding the industry, without having that operator lens; they don’t have a true understanding of what it will actually take to get people to operate differently. If there aren’t the right individuals supporting the investors and getting them to understand what a realistic timeline may look like and what challenges may arise, then it can fail.”
