This fabric recycling company was going to change fashion. Why did it suddenly go bankrupt?

Last year, the world’s first industrial textile-to-textile recycling plant began turning old clothes into pulp that could be turned into new fabric. A long list of clothing companies wanted to use the material; companies like H&M and Levi’s had already tested it. But Renewcell, the company that designed the plant, declared bankruptcy this week.



The technology turns old cotton T-shirts and jeans into a raw material that can be sent to spinners and weavers to make lyocell or viscose, fabrics that are normally made from hundreds of millions of trees each year. But the company says that demand for its product was much lower than expected. Because of that, it wasn’t able to raise enough long-term funding to keep going. (Fast Company previously recognized Renewcell’s technology as part of our World Changing Ideas program.)



It’s not that clothing brands don’t want to use materials like this, says Nicole Rycroft, founder of the environmental nonprofit Canopy, which works with the apparel industry. “We work with 550 brands that represent a trillion dollars, and I do truly believe that they are all deeply invested in seeing next-gen solutions come to scale,” she says. “But we’re changing a system that’s been in place for 150 years, that drives toward economies of scale and low cost. And I think what we’ve seen here with Renewcell is that no one had really quite wrapped their mind around what it was going to take to pull something through that was new into a really well-established system.”



It took time for Renewcell to begin to optimize its production, says Rycroft, who works with both apparel brands and textile innovators, including Renewcell. The spinners and weavers that it partnered with also weren’t prepared to work with a new material, and had to tweak their processes. Brands hadn’t necessarily budgeted to pay a premium as production scaled up. (Renewcell declined to comment.)



Nikolay Anguelov, a public policy professor at the University of Massachusetts Dartmouth and author of The Sustainable Fashion Quest, argues that the company’s business model of selling its pulp, called “Circulose,” to other companies to make yarn and then fabric, was destined to struggle because the company wasn’t controlling the whole process itself, and it was inherently difficult to scale up. (If the pulp is made into viscose, Anguelov points out that the production also requires toxic chemicals; Rycroft notes that lyocell is much less chemically intensive.)



But pioneers in any new industry, including early manufacturers of solar power or electric cars, have often faced setbacks, says Rycroft. “It’s especially bumpy until there’s both critical massive uptake as well as the systems throughout the entire value chain,” she says. The bankruptcy is a sign that governments should be offering more incentives to help companies scale up, not just run early-stage pilots, she argues, and that companies need to lean in to embrace the solutions that exist. “This sobering moment is almost a call to action for business leaders to align their actions with their commitment,” she says. The next step will be to see if the company can be saved in the bankruptcy process—and if the thousands of tons of recycled material that it has sitting in storage can be put to use.