Can Microdosing Save the Next-gen Material Industry?

A while ago, I wrote about the textile recycling dilemma ((3) The Textile Recycling Dilemma - Cutting Through the Hype | LinkedIn ) and the uncovered some truths about material innovation in textiles (https://www.dhirubhai.net/posts/johannes-stefan_sustainability-circularity-textileindustry-activity-7174333325518528512-Of6A?utm_source=share&utm_medium=member_desktop ). Among other aspects I wrote how cost is a major roadblock for the scale up of recycled/next gen materials. Cost not only in the form of raw materials, but also in the form of added costs and margins in the fragmented textile supply chain. Many apparel brands today talk about and seem to be committed to sourcing next-gen materials at scale. But not a single apparel brand, textile supplier, fiber or raw material producer that I am aware of has been able to overcome the cost barrier or seems to have a real plan how to do so in future.

The consequence is that there is very little progress. If we look at the UK market today* for instance, only 55 brands (out of thousands) offer products containing either Circulose (18 brands), OnceMore (3 brands) or Refibra (41 brands) in their webshops. A year ago, this number was 65. Taking aside H&M, Timberland and Lindex, who are the only brands with at least a somewhat decent range of products with these materials, most other brands seem to have not been able to move past the ?capsule collection“ stage. In fact, out of the 55 brands, 34 brands only list 5 or less products containing these materials. If we take out Refibra, where production has been temporarily paused, only 21 brands remain, of which 11 brands only offer 5 products or less.

*data extracted from the EDITED Market platform (www.edited.com )

What is going wrong here?

It seems that these materials work from a technological and performance standpoint (this is what pilots and capsule collections aim to prove), but they don’t seem to work by commercial standards. Materialinnovation.org currently lists 152 next-gen materials in their Innovator Database. What are the companies behind these innovations going to do differently? How are they going to scale up from capsule collections to actual commercial programs, and how are they going to increase their reach from a handful to hundreds of brands? After all, innovation is not just about developing a technology or product to address a problem and about showcasing it on pilot scale, in limited editions or capsules. It is as much about the art of scaling up in an industry that is surprisingly fast in identifying and capturing consumer trends, but painfully slow in changing its ingredients.

The macrodosing trap

I have seen many cases where brands demand high shares of recycled content. ?Often because of their own sustainability guidelines, to get their products certified (e.g. RCS, GRS), because their customers would not take a product with a low recycled or next-gen content serious, or would even consider it greenwashing. I have also seen next-gen producers encourage their customers to use as high a share as possible of their material in end products. Often in an effort to make the material more "relevant" in the end product, build brand recognition, and drive volume. It seems as if the industry agrees that more is better.

But this can be a dangerous trap. While a high share of a new material might be required (or at least helpful) for a proof of concept or capsule collection, it can kill the commercial scale up. Production complexity and costs often increases exponentially with growing share of a new material, pushing the product into a premium niche.

Here is how the story often goes in the recycled MMCF industry:

Perspective 1: Pulp production

Driven by brands‘ public commitments to source more next-gen materials, a company develops pulp made from recycled textiles. After investing millions into R&D, they finally have a commercial product ready. The product is based on uniform textile waste that is imported from a trader in the far east, who carefully selects, sources, cleans and prepares the materials according to the pulp producer’s specifications. After undergoing a series of process steps requiring sizeable amounts of heat, electricity and chemicals, the recycled pulp is ready. It is not yet as good as pulp made from virgin wood, but it comes close. Given the enormous amount of investments and operational costs, the pulp producer offers the pulp at three times the price of conventional wood pulp – a price that just covers production costs.

Perspective 2: Fiber production

Based on its customers’ requests for “high recycled content”, the fiber producer develops a product with 50% recycled content. The pulp costs double compared to the virgin alternative. During production, the fiber producer encounters lower efficiency, needs more skilled operators and incurs off-grade material, so they are forced to increase the fiber price further. When the fiber producer offers the product to its key customers, several decline to run trials due to the high fiber price.

Perspective 3: Yarn production

A yarn producing customer decides to run a trial, regardless of the high fiber price. They also encounter challenges during production as they usually work with uniform, high-quality Viscose fibers. The yarn producer needs to produce on a small line, with lower production output and have the best operators oversee production. They end up with some amount of second quality yarns that they cannot offer to their regular customers. So instead of calculating the usual cost for the spinning of a yarn of that type, they add the additional costs to their offer price. When offering the yarn to key fabric mill customers, most give feedback that given the current economic circumstances, they don’t see enough demand for a product like this and decide against running a trial.

Perspective 4: Fabric production

A weaving mill decides to go ahead, regardless of the high yarn price. They purchase sample yarns to develop a small fabric collection to showcase to some of their best customers at European premium brands. After encountering some challenges during weaving and dyeing, leading to lower than expected efficiency and some low quality output, the fabric mill is forced to factor these additional costs into their calculation. Considering that at this price level their target customers will likely only afford a few thousand meters of fabric, the mill also adds a surcharge for the small production volume. Eventually, the fabric mill offers a fabric price that is 70% higher than what they would offer for the virgin alternative. Most of the mill’s customers don’t order anything, concerned about the high fabric costs.

Perspective 5: Brand/retail

A brand decides to go on with a capsule collection to honor their own commitment towards using next-gen materials. It is a special project, co-funded from the sustainability budget, and therefore doesn’t have to meet the same target margins as their regular products. The collection receives accolades in fashion magazines and conferences.

Back to the fabric producer

The fabric mills doesn’t receive a follow-on order. When they try to understand the reason why, the brand explains that they can only accept incremental costs of maximum 10%, since they cannot lower their retail margins and their customers don’t pay extra for the recycled product. After all it is "still Viscose”, and at this cost level, they could also go for a product with more premium fibers like long staple cotton, linen or wool blends. The fabric producer goes back to its yarn supplier to ask for a price reduction.

Back to the yarn producer

Unable to meet the fabric mill‘s demand to lower the price, the yarn producer doesn’t want to take any risks and decides to produce “on demand” only. The demand doesn’t come, only some requests for small capsule collections and trials. No further fiber purchases are made.

Back to the fiber producer

The fiber producer wonders why there is only very little demand for the new material, despite there being so much good publicity around the capsule collections. They confront brands with the fact that the extra cost of the fiber should only amount to about USD 0.50 in a piece of garment that certainly costs USD 50.00 in retail, and asks why a cost increase of 1% is not affordable to the brand. The brand responds, explaining that the costs are simply too high and they would wait for EU legislation to come into force before being able to go ahead. The fiber producer keeps the product in its portfolio to “gain plus points with NGOs”, but only <1% of its total production output contains recycled materials. The situation is similar for other fiber producers.

Back to the recycler

The demand for recycled pulp is not big enough for recycled pulp producers to operate profitably. Investors stop providing funds that would be required to invest in research and development and to cover production overheads. Recycled pulp producers withdraw from the market. The textile industry continues to rely on virgin materials.

The case for microdosing

Next-gen materials in general, and chemically recycled materials in particular, are expensive. Raw materials are not uniform, extracting them requires costlier transport and more manual labor. Specialized machinery and technology is required that needs to be developed and financed. High costs for energy and chemicals need to be paid. On many steps in the supply chain (fiber, yarn, fabric), modifications to production processes are required. Production efficiency and quality on these steps will be lower. Special know-how and equipment may be required. Converters/suppliers must take more risks since the addressable market for the material is small. This drives up costs to a degree that makes it unfeasible for brands to adopt recycled materials at scale. Brands‘ margins are thin, consumers are not paying extra, and while brands are eager to use recycled materials, there is no legal obligation for them to do so.

But what if we changed one part of the equation? What would have happened if the fiber producer only added 5% or 10% of the new pulp into their production instead of 50%, and brands were ok with it?

• Raw material costs for the fiber producer only goes up by 10% or 20% rather than double. With a lower amount of recycled materials, fiber production processes and machinery doesn‘t have to be altered. The fiber producer is able to offer the fiber at a lower price, leading to a larger group of yarn spinners and fabric mills running trials and developing collections.
• Yarn and fabric producers‘ production costs stay almost on par with virgin alternatives, as the small % content does not interfere with their efficiency and quality standards. They don‘t incur significant extra costs and would therefore be able to offer it at marginal upcharges.
• Brands find the upcharges acceptable for larger collections and bulk purchases. This encourages more and more textile suppliers to offer products with this fiber, increasing the supplier base and bringing costs down for brands.
• More and more fiber suppliers adopt recycled pulp in their productions, some of them project to use recycled fibers in 30% of their output within a few years. Some fiber producers develop a premium line with 50% recycled content in parallel to fibers with lower recycled content to meet the growing demand from some leading brands.
• EU legislation on mandatory recycling content is adopted. More and more brands outside of Europe and North America are asking for products with recycled content.
• Innovators are able to fill their plants and operate profitably. They continue research and development in this field to bring costs down. Several new recycling pulp players emerge on the market, attracted by the growing demand.

While more seemingly is better if we trust consumers, brands and producers, it inevitably increases complexity, and therefore cost not in a linear but in an exponential fashion. In other words, more doesn’t cost more, it costs much more. And once the material has passed through the various processing steps in the textile supply chain, it costs much, much more.

Let’s try to put these two scenarios into numbers.

Let’s assume we look at a total addressable market of 1 million tons of Viscose fibers. This may come close to the end consumption of these fibers in Europe and North America. Since both are saturated markets, it is reasonable to assume that total consumption of Viscose fibers will not grow in these markets. Let‘s now assume our ambition is to replace 1/4 ?of this consumption, 250,000 tons in total, with pulp from recycled textile waste.

The amount of recycled materials used can be expressed as a function of the number of end products with recycled content (the more products, the more recycled pulp), and the average share of recycled pulp in a product (the higher the share, the more recycled pulp).

Let’s put these assumptions into a simple table.

If the industry’s goal is to reduce the use of virgin input factors, it shouldn’t matter if this consumption is achieved with few products at a high recycling share, or many products at a low recycled share, or a variation of it. Let’s draw this as a line into our table and call it the "Equal Impact Line".

The Equal Impact Line indicates different combinations that lead to the same outcome. All points, at which the same amount of virgin resources are saved, or all points at which the same amount of textile waste is used (similar to what an ISO curve is for the economists out there).

What approach has the industry taken so far to grow the use of recycled materials? Canopy lists three Viscose producers with commercially available next gen solutions (https://canopyplanet.org/solutions/next-generation-solutions/next-generation-solutions-providers/ ).

• Tangshan Sanyou "ReVisco" with 50% recycling share (and an ambition to increase to 100% recycling share according to their website)
• Birla Cellulose "Liva Reviva" with 20% recycling share (30% according to the Birla website)
• Lenzing "Ecovero x Refibra" with 20% recycling share and a vision to increase to up to 50%

Let’s indicate this in our table and call it "Macrodosing", since apparently more recycling content is better.

This path might be a dead end. Costs of producing such high purity pulp and fibers, coupled with additional processing complexity in the textile supply chain, will make these materials only accessible for premium brands or niche/capsule collections. The vast majority of brands will not be able to adopt at scale.

Let’s indicate a different path in our table, and call it the "Microdosing" path. In this approach, the aim is to use very little recycled content, but reach a larger share of end products.

This path aims to achieve the same amount of recycled input, while avoiding the exponential growth of cost that comes with high recycling shares.

Why is this relevant?

If we genuinely want chemical recycling to be done at scale, the industry needs to rethink its obsession with recycled content. It currently values perfection over progress. If we took the capacity of all Canopy "Green Shirt" MMCF suppliers, 250,000t of recycling pulp would amount to less than 7% of these suppliers annual production output. Doesn’t sound all too challenging, does it? With a Microdosing approach, 250,000t of recycled pulp could be achieved in the matter of a few years as production of chemically recycled textile waste ramps up. With the current Macrodosing approach, 250,000t is nothing more than a dream. It is more than 4x Renewcell, who failed to even come close to full capacity.

Microdosing is the only approach I believe is viable before technology, market demand and regulation is advanced enough to use higher recycling shares at scale. It’s not very fancy, brands might not be able to get RCS certifications, producers might not be able to put their brand labels on it, consumers won’t be able to see it. But it does the job, and isn’t that what really matters?

In the case of chemical recycling in particular, but the entire universe of next-gen materials in general, more might be less, and less might be more.