Renewcell was one of the first companies to offer Circulose, a material made from recycled cotton, to the fashion industry. It seemed like an armoured, solid, successful project. Instead, it went down like others born to explore the new frontier of next-gen materials, which when they are born, generate bursting hype. Then, however, they often burst. Let’s try to understand why
‘It is a sad day for the environment, for our employees, our shareholders: it is a statement of the lack of leadership and the need for change in the fashion industry’. These are the words pronounced by Micheal Berg at the bedside of Renewcell, the Swedish company he chaired, which filed for bankruptcy at the Stockholm court on 25 February. A not-so-veiled accusation against the fashion system, accused of not wanting to change the paradigm because it would not be willing to lose a single cent of its profits.
The failure of Renewcell
The Swedish court approved the bankruptcy petition two days later, on 27 February. Renewcell, as stated on its portal, ‘was unable to obtain sufficient funding to complete the strategic review, announced on 20 November 2023, with satisfactory results’. Fifteen days later, on 15 March, it ‘announced a new deadline for the receipt of purchase offers’. It is 28 March, ‘in order to satisfy offers from various companies. The trustee anticipates that a new owner will be secured at the beginning of April and will be announced shortly thereafter’. In the meantime, however, there is much to ponder about his case and how he allows what is happening to the so-called next-gen materials to be analysed.
Story of a failure
Renewcell was one of the first companies to offer Circulose, a material made from recycled cotton, to the fashion industry. The company had reached the point that many next-gen materials start-ups dreamed of reaching and seemed destined for solid and substantial success. It had everything. It had a commercial product and was constantly increasing its production capacity.
It had H&M as a significant shareholder, and its customers included names like Levi’s and Ganni. It had built a network of 151 suppliers who knew how to handle the material and had a pool of financiers behind it, including the incubator Girindus and BNP Paribas. For the entire ‘next generation’ materials industry, Renewcell was an example: the North Star to follow.
But something went wrong. In December 2023, in an attempt to save Renewcell, H&M signed a purchase agreement for 7,000 tonnes of Circulose in 2024 and 11,000 tonnes in 2025. Renewcell CEO Magnus Håkansson had, however, told Sourcing Journal that the company would have to sell between 80,000 and 120,000 tonnes of fibre per year to break even. A lot. Too many.
The limits (not only) of Circulose
It is clear that Renewcell’s bankruptcy is a blow to the commercialisation of next-gen materials, not least because it comes six months after Mylo‘s knockout. One limitation of Renewcell is that it only recycled 100% cotton. However, this is certainly not the main reason for its failure, which is to be found in broader structural challenges. For example, achieving commercial scalability, already difficult in itself, is only the starting point of another, even more complicated path that sees investors lobbying for profits.
Most likely, however, the highest hurdle to overcome is yet another. Circulose was more expensive than the traditional materials, which it claimed to be an alternative. In the fashion value chain, no one seems willing to pay a little more for a product that, on paper, is more sustainable. Neither consumers (bewildered by greenwashing scandals) nor brands, who are in a cut-throat market, pay attention to even a penny difference and where costs and efficiency are always under strict control.
The priority of financial returns
“Brands will continue to choose the best option for their bottom line,” cuts Ken Pucker, who teaches Sustainable Economics at Tufts University’s Fletcher School. In Sourcing Journal, Pucker says: “Courageous innovators like Renewcell are hampered by a system that prioritises financial returns over planetary well-being. Until regulators make companies pay for negative social and environmental outcomes, most new solutions will remain small-scale and, therefore, disadvantaged’.
A collective failure
The fashion sustainability platform Fashion for Good entrusted LinkedIn with its comment. “This is not just a failure for Renewcell. It is a collective failure driven by a lack of urgency and misalignment in a complex system between brands, supply chain partners, and investors.” The same platform fears that the Mylo and Renewcell cases will slow investment and take away brands’ hunger to use the next-gen materials.
In turn, Nicole Rycroft, founder and executive director of the award-winning Canadian environmental non-profit Canopy, believes that ‘without bold commitments from all stakeholders, including fibre manufacturers, global brands and governments, we will not be able to implement sustainable solutions‘. In the end, therefore, it always comes back to the same point: who pays for change in fashion? Incidentally, who wants to do it while super-fast fashion rages on?
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