What Went Wrong With Renewcell?
Shock. Disappointment. Worry.
Those were just some of the emotions coursing through the industry following Renewcell’s bombshell revelation on Sunday that it had filed for bankruptcy—the result, the beleaguered textile recycler said, of failing to cinch enough funding to wrap up the Hail Mary strategic review it began in November after months of waning sales and falling stock prices.
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The Stockholm-headquartered company managed to raise nearly $10 million in cash—enough for a few month’s breathing room—from H&M Group and Girincubator, its largest shareholders with stakes of 10.3 percent and 9.5 percent, respectively. But efforts to ease its liquidity and capital crunch in the longer term have continued to founder despite “intense dialogues” with investors, banks and other stakeholders, providing no obvious way forward.
“This is a sad day for the environment, our employees, our shareholders and our other stakeholders, and it is a testament to the lack of leadership and necessary pace of change in the fashion industry,” said Michael Berg, chairman of the board of directors.
On Tuesday, Renewcell, which christened its plant in the coastal city of Sundsvall Renewcell 1 in the hope of a Renewcell 2 and 3, announced that the Stockholm District Court had approved its application.
While a spokesperson for the company has promised more clarity into “what this all means” over the next few days or weeks, this could very well mark the end of the road for Renewcell. Sweden’s insolvency system consists of two types of proceedings for financially struggling businesses: bankruptcy and company restructuring. The fact that the Circulose maker opted for the former, which allows creditors to jointly seize a debtor’s assets to pay off their respective claims, augurs ill for the firm, and indeed the entire so-called “next-gen” materials sector that has held it as a exemplar of scalable progress.
So what went wrong with Renewcell, which only days before its startling disclosure was feting its expanded supplier network, now with more than 150 members worldwide?
“While the ground has never been more fertile for a next-gen transformation, the fashion value chain was not fully prepared to support this first-to-market leader in bringing sustainable fashion from niche to mainstream,” said Nicole Rycroft, founder and executive director of Canadian forestry nonprofit Canopy, which champions sustainable, deforestation-free alternatives to viscose and other man-made cellulosic fibers.
Rycroft described Renewcell’s move as a “sobering moment,” one that shows the fundamental mismatch between promises and action. Without bold commitments from every stakeholder, including fiber producers, global brands and governments, “we will not be able to implement low-carbon solutions in time to limit global temperature rises and avoid the worst impacts of climate change,” she said.
The fact that Renewcell was the first of its kind to successfully make the leap from pilot to industrial scale makes its lack of uptake confounding for many, though less so for others.
“Renewcell’s bankruptcy is a stark reminder of the immense challenges in scaling next-gen materials,” said Priyanka Khanna, innovation director of scaling at Fashion for Good, a platform that helps sustainable startups grow. “The complexities involved in transitioning the industry are far and wide and require not only technology in place but also strategic financial planning and comprehensive stakeholder action. For the industry, it’s clear that a viable innovation in the market does not guarantee adoption. There is a development process and premiums to think of, as well as an appetite for margin impact required.”
For people like Stacy Flynn, co-founder and CEO of Evrnu, which makes a regenerated lyocell called NuCycl from cotton textile waste, Renewcell’s news hits close to the bone. Like Renewcell, Evrnu, too, has struggled to amass the tangible financial commitments it needs to rustle up capital to get beyond the proof of concept or capsule collection stage.
“Renewcell was an early trailblazer in an emerging category which is always an incredibly difficult position to be in,” she said. “Their filing demonstrates the uphill battle in disrupting legacy industries and the challenges we face as a society to encourage and adopt new and more sustainable practices. [It also] demonstrates that financing and business adoption are both critical to the success of sustainable business practices and that both are in short supply.”
That’s not to say that Renewcell didn’t get any bites. Ganni, H&M Group, Levi Strauss & Co. and Zara owner Inditex have all been early adopters of its dissolving pulp. When cracks in the company began to manifest in October, Inditex committed to snapping up the first 2,000 metric tons of Circulose and responsibly harvested cellulose-blended fiber from Chinese textile manufacturer Tangshan Sanyou. In December, H&M, which has been an investor since 2017, signed a term sheet to acquire 7,000 metric tons of Circulose in 2024, and 11,000 metric tons in 2025.
But businesses cannot live on buzz alone. To break even, Renewcell needs to shift 42,000 metric tons of pulp—the equivalent of between 80,000 and 120,000 metric tons of fiber, depending on the final mix—per year, Magnus H?kansson, who took over as acting CEO from Patrik Lundstr?m in October, previously told Sourcing Journal. That would require some 20 brands to commit to 6,000 metric tons of Circulose-incorporating fiber apiece annually.
Inditex said that it didn’t comment on news from other companies. H&M said that it has “continuously supported” Renewcell’s development and “has had great confidence in its vision during this time” but that the firm has “not been able to secure additional demand, leading to the current financial situation and [the] bankruptcy announcement.” The retail giant added: “We regret [the] announcement from Renewcell but have after many discussions reached the decision that we cannot invest more capital in the company based on current conditions.”
Renewcell’s loss could be a bigger problem for fashion. A joint analysis by Boston Consulting Group, Textile Exchange and Quantis, which they unveiled at Textile Exchange’s annual conference in October, said that unless the industry ramps up the share of preferred raw materials, it risks facing a 133 million-ton deficit by 2030. In other words, the dearth of investment in one of the most promising textile-to-textile recycling solutions will not result in the system-level transformation the industry needs.
“This needs to be a wake-up call for the industry that the responsible material production systems it is relying on to achieve its climate goals cannot develop without investment,” said Ashley Gill, chief strategy officer at Textile Exchange, describing the “innovation gap” that needs to be bridged if the sector is to meet its 45 percent greenhouse gas emissions reduction target for the production of raw materials by 2030, in line with the Paris Agreement.
“This includes the potential reduction related to systems that are being developed as alternatives to traditional materials production, such as textile-to-textile recycling and regenerative agriculture, which are difficult to model today,” she said. “To successfully close this innovation gap, brands need to collectively prioritize channeling funds towards the development of these solutions in a more organized way.”
Jocelyn Wilkinson, partner and associate director at Boston Consulting Group, agreed that the bankruptcy announcement poses a challenge to brands in terms of how they collaborate with supply chain producers to tackle raw materials impacts in the future, particularly as a raft of legislation governing lower-impact product design come into effect. Scope 3, which refers to greenhouse gas emissions outside of an organization’s control, can make up 90 percent of a brand’s carbon footprint. Of that, more than half are generated by Tier 2, or material production.
“This news is a real shame, especially in light of the fact that we know recycled materials are one of the absolutely crucial ingredients for reducing the environmental impact of the fashion industry,” she said. “And given the dual pressure of regulatory changes and Scope 3 targets, it strikes me that we need to reframe the discussion of reduced impacts materials towards a business imperative rather than sustainability challenge, developing business cases accordingly.”
Khanna said there are “significant” lessons that the industry can learn at Renewcell’s expense, among which are that scaling up operations requires comprehensive planning, including financial considerations, plant capacity, longer research and development timelines and robust stakeholder support all across the supply chain.
“Year One shouldn’t be focused on revenue generation,” she said. “Impatience from the financial market, especially for a public company can be detrimental. It questions whether going public is the right approach for scale-up innovators without established facilities.”
At the same time, as long as virgin inputs continue to be cheaper than their recycled counterparts, brands will continue to pick the option that’s best for their bottom line, said Ken Pucker, who teaches sustainable business at The Fletcher School at Tufts University.
“Courageous innovators like Renewcell are encumbered by a system that prioritizes financial returns ahead of planetary wellbeing,” he said. “Until regulators make companies pay for negative social and environmental outcomes, most new solutions will remain subscale, and, thus, disadvantaged.”
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