A Lesson in talking about Material Circularity to kill it. Just Talking and not understanding circular processes kills companies.

I read an article about an year and half ago about Renewcell a Company that recycled clothing and recovered fiber from used cotton clothing to be reused into making cotton yarn. It was the dawn of the circular age and also learnt that the EU was launching a digital product passport for textiles. The investors in this company were H&M the textile retailer and the pitch of the company was as follows " Renewcell is a fast-growing Swedish textile recycling company with a unique technology and a world-class team of people on a mission to change the global textile industry for the better. We plan to recycle the equivalent of more than 1,4 billion t-shirts every year by 2030.

Our product is called Circulose?, and we make it out of 100% textile waste. Brands use it to replace high impact raw materials like fossil oil and cotton in their textile products."

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It sounded so wonderful, here was a company that planned to recycle the equivalent of more than 1.4 Billion t-shirts every year, which meant that the recycled cloth would be reused in new clothes that companies like H&M would use and also be available to the competitors of H&M. This was a company of the future I thought.? Making the story short, I was surprised to see the article that this new company had filed for Bankruptcy on 25th February 2024 https://www.renewcell.com/en/renewcell-decides-to-file-for-bankruptcy/

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So I tried to understand why such a promising company went Bankrupt, I called up the Chairman of the board of this company and the CEO and the story of why the company went bankrupt surprised me.? It seems the Textile retailers would not buy recycled textile from Renewcell for two reasons. One, the quality of the recycled cloth was not comparable to the virgin cotton they got and the second reason was that the cost of the recycled cloth was higher than virgin material to the tune of 20% to 50% higher. So the cloth made from recycled clothing recovered by Renewcell cost around 1.2 to 1.5 times more than Virgin Material? the company bought in China or India or Bangladesh. ?And these were the places they manufactured clothing to be exported to the US and EU in H&M shops. Hence, the H&M and other textile companies purchase departments did not buy clothing from the company H&M had invested in.? Then the process for how the clothing would be recycled is even funnier. The Renewcell company in Sweden would take old clothes and extract fibers from these clothes, which would then have to be sent to a weaving and cloth making company in Asia where the company would use the fiber recovered by Renewcell into cloth they manufactured to be sold to the Clothing retail company. I then read an article about how California had 1.8 Million tons of used clothing being dumped in California and the laws they were making to ensure that the clothing did not land up in waste and would be recycled. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240SB707

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What puzzled me was the fines in this legislation to textile retailers like H&M and Zara or any retailer who wanted to sell clothing in California.? These companies had to agree to fund Producer responsible organisations which would have collection centers at different locations in California where used clothes would be collected for proper disposal, which meant they would not be sent on a ship to be dumped in Africa, but would be perhaps recycled. The penalties in this bill are around 10000 USD to 25000 USD for retailers who willfully violate following the bills terms. ?I could not keep laughing when I saw the irony of the whole set up. The senate in California would jump that they had passed a stringent law to keep California clean from the 1.8Million tonnes of used clothes which are dumped in California each year. And even if the textile act was followed in California and the 1.8Million tonnes of clothing was recovered, the next unanswered question was what would californis do with the collected clothing. Burn it or send it on a ship to some country that accepted clothes being dumped in their country.

Clearly even if they collected it for recycling, without having a sorting process, you have all clothes in one dump which are really not sortable. As I mentioned the Renewcell company in Sweden recycled cotton material like Jeans etc. The clothing which would be colleted in California would be a mix of all types.

The other news I saw today was of NorthVolt a Swedish Battery manufacturer laying off 25% workforce in Sweden. This company was funded by Volkswagen and made batteries for use in Electric cars. Here too the company has not found the uptake of batteries from consumers that makes it profitable. The Batteries market is dominated by over supply from China and Northvolt had a loss of 1 Billion Euros in 2023 and had to go for another green loan. In addition BMW cancelled an order amounting to 2BUSD because of the quality of the batteries from North Volt. Hence the cost cutting. Here also we see the same issue, the whole circular cycle of the company has not been thought through for demand or how the model will sustain itself.? So the lesson is that you can kill companies that build green products by not paying any attention to the value model for the company ?and just talking about how great this company is going to contribute to the green world of tomorrow. That is the flavour of today and if we want a greener world to work we better understand the value model for the company to stand up on its own in the market. ?Else we can kill companies by just talking green and not caring about the model to sustain the company.