New generation textile materials. Of all types (cotton, viscose or polyester, for example) and processed in different ways (mechanical and chemical recycling). Whatever they are, they all share that they are the great hope of the fashion industry on the path to sustainability. From Seaqual to Infinited Fiber, through Spinnova, what are the next gen drivers in the sector and what challenges do they face?
The next gen engines:
the key to fashion
Companies like H&M, Zalando and Bestseller have Ambercycle’s back. Syre, for its part, was born at the will of H&M’s million-dollar investment, while Circ convinced the king of large-scale distribution, Inditex, to participate in the company. If until now the sustainability department (when there was one) was in charge of making decisions, the increasing investments that companies need to make in the sector have gradually transferred responsibility to other departments. The finance departments and, specifically, their top executives, today hold the key to investment in sustainability and, therefore, the scalability of raw materials. next gen.
CFOs, or financial directors, have, on the one hand, control of companies’ finances and, on the other, they are responsible for controlling the risks to which companies are subject. Sustainability is at risk today, not only due to potential non-compliance with legislationbut also because of the possibility of running out of raw material supplies.
This idea hovered over all the conversations at the last edition of the Copenhagen Fashion Summit, in which the crisis of Renewcell and other innovative companies in raw materials weighed on professionals in the sector. In fact, one of the few top executives of a large fashion company to take the stage at the conference was Adam Karlsson, CFO of H&M, whose speech was about crowdfunding to evolve the value chain towards sustainability.
Peter Majeranowski, president and CEO of Circ, agrees. “Until now, the system was based on profit, on being able to produce at the cheapest price possible.and to change this system so established over the years, you inevitably have to go through the CFO,” says the businessman.
CFOs hold the key to company resources and are responsible for controlling risks.
Whether a large fashion company decides to bet, or not, on the company that develops new materials can be decisive for many of them, which are still taking their first steps in the sector. A good example of this is Renewcell (now Circulose), which began a free fall after failing to raise sufficient funding from its shareholdersamong which was H&M.
“Even if a project makes sense, If there is no clear path by which you are going to generate a profit at some point, it is not going to work” explains Shay Sheti, co-founder and CEO of Ambercycle. The company specializes in recycling recycled polyester, one of the most used materials in fashion, and has already managed to introduce its fiber into the collections of Inditex, Ganni and Gap.
Under the framework of the Paris Agreement, Many of these companies have set sustainable goals, including the use of a certain amount of recycled material before 2030.. The sector faces, however, the difficulty of scaling the main chemical recycling solutions necessary to reach the quantities of fiber currently moved by the sector.
The push from fashion comes mainly from two points, as Majeranowski explains, ranging from the need to protect itself from the waves of sustainable legislation around the world, and the cost of not complying with them, such as controlling the risks of staying without provisioning. If recycled materials are going to be increasingly in demand, and companies in the sector cannot meet the demand, fashion could run out of these raw materials.
“Access to circular materials in large quantities has, until now, been limited, and many companies have understood that, in the future, supply runs the risk of not meeting demand,” warns Dennis Nobelius, CEO of Syre.
Syre alone required an initial investment of 600 million euros.
The only ones that can carry out these investments, often in the millions, are large companies, managers warn. Syre’s initial investment alone reached 600 million euros, which it will receive within a period of seven yearsmore than 85 million annually, in addition to the 500 million dollars that the two large-scale plants that the company plans to build in 2026 and 2027 will cost.
“Being the largest in the sector comes with responsibilities”, adds Sheti. So far, Ambercycle has managed to close two rounds of financing, worth 27 million euros, while Circ closed a round for 30 million, with which it gave access to its capital to Inditex or Zalando.
Despite the million-dollar outlay involved in participating in these companies, the dynamics in recent months have varied. “Now many companies are contacting us, but not so long ago, in 2018, it was the other way around,” Sheti recalls. Majeranowski also agrees with him, confirming that more and more companies are going to look for them“especially since just a few months ago,” he adds, and Nobelius, which predicts that more and more companies will invest in the sector.
Many of these conversations begin with companies’ sustainability teams, who have the technical expertise of many of these. The final decision, however, depends on both the financial department and the majority shareholders., and it depends on how such high investments are justified. “If the risk is too high, it is difficult for it to work,” says Sheti.
