Textile Recycling: Sustainable Fashion With Canadian Paper and Pulp
By: Rubaina Singla
The Ivey Business Review is a student publication conceived, designed and managed by Honors Business Administration students at the Ivey Business School.
Presenting Paper and Pulp
On Paper
Canada's paper and pulp (P&P) manufacturing industry employs over 47,000 people, with the domestic value of exports totalling approximately $15 billion in 2020. P&P manufacturers produce a wide range of paper products, including printing paper, tissue paper, packaging materials, and raw pulp.
A Crumpling Industry
With an overall transition to digital formats for information sharing, the P&P industry has seen a significant decline in recent years. Amidst varying trade policies, concentrated competition in the domestic market and increasing competition from global players, the Canadian P&P industry has seen revenues decline by 6 percent annually from 2018 to 2023, while industry profits have declined by 13 percent over the same period. Though industry profits are expected to stabilize at around 10 percent, revenues are expected to continue declining at 4 percent annually through 2028. Overall this continued decline is driven by a secular decline in demand, downstream impacts of slowing demand in the newsprint industry, and expected declines in exports to the United States.
Considering the unfavourable industry outlook, Canadian P&P manufacturers must look for new streams for revenue generation to provide long-term earnings stability — and the fashion industry could provide a viable solution.
Fashion’s Dirty Little Secret
Employing one-sixth of the world’s workforce, the fashion industry is a major employer and massive polluter. Its material extraction and product end-of-life stages, the most environmentally harmful components of its value chain, create over 10 percent of global carbon emissions and contribute to microplastic pollution and soil degradation.
With increasing consumer awareness regarding environmentally sustainable textiles, consumers have demonstrated their preference for green brands. Notably, 75 percent of millennials are so eco-conscious that they have changed their buying habits to favour sustainable products. These preferences have been reflected in the size of the sustainable garment market, which is valued at $150 billion and expects to grow at a CAGR of 8 percent. To satisfy this skyrocketing demand, sustainable garment manufacturers will need alternatives to their existing raw materials — a perfect role for recycling.
By 2030, there will be over 134 million tons of global textile waste added to landfills per year. While 95 percent of discarded textiles have the potential to be recycled or reused, less than 12 percent are ever recycled into new products. Worse, less than 1 percent are recycled into new fashion products. Textile-to-textile recycling — the process of mechanically and/or chemically breaking down textile waste to create new fashion products — is acknowledged as a critical component in transitioning the fashion industry from linearity to circularity, but has not been achieved at a commercial scale to date. This contributes to a $500 billion economic opportunity loss from a lack of capitalization in circular methods, a major opportunity for new entrants.
Turning Over a New Textile Leaf
Introduction to MMCFs
Man-Made Cellulosic Fibers (MMCFs) — fibres made from wood pulp — are growing in consumption at a faster rate than polyester and cotton fibres, its two largest competitors. Demand for MMCFs is expected to increase from $18 billion in 2022 to over $27 billion by 2027 at a CAGR of 9 percent. Because MMCFs are made using plant-based fibres rather than being derived from fossil fuels, they may appear to be more sustainable to manufacturers and consumers. In reality, the manufacturing process for MMCFs uses chemicals, large amounts of water, and wood pulp frequently sourced from unsustainable forestry providers. These undesirable practices are best replaced by recycling MMCF fibres.
Chemical textile recycling is a promising and emerging field, offering the possibility to extract versatile raw material cellulose fibres from existing textiles. This process bears striking similarities to the process of extracting cellulose from wood pulp during paper production, an opportunity for existing P&P firms to capitalize on underutilized manufacturing assets.
While the input for each process differs, the physical breakdown of raw materials and their transformation into finished products is nearly identical. Both processes encompass preconditioning — where the materials are physically broken down before being purified using chemicals — and digestion, where the liquid is digested to create pulp and then dried out to yield the finished products.
From Rags to Riches: Renewcell Case Study
Companies like Renewcell are already piloting cellulosic fibre recycling using adapted paper pulp factories. In 2016, Renewcell opened its first industrial-scale plant and laboratory, adapted for extracting and recycling cellulose from discarded clothing. Their dissolving pulp, Circulose(r) is a 100 percent recycled, plug-and-play input for viscose fibre producers and has been piloted in products for H&M, Zara, Ganni, and Tommy Hilfiger.
In 2021, the company acquired their second factory for a commercial-scale cellulose pulp recycling site. Prior to ceasing operations due to declining demand, the facility was used by SCA to print paper. Renewcell was able to successfully adapt the plant’s capabilities for cellulose pulp processing to transition the facility into the largest chemical textile recycling plant of its kind.
The SCA plant was described as an “ideal site” to build textile-to-textile recycling by CEO Patrick Lundstrom: “Sundsvall and Ortviken are an ideal place for us to establish our new plant. Since our recycling process is based on traditional pulp technology, almost all the infrastructure we need is already in place. The most important thing, however, is that there is a lot of great expertise in the area”.
Renewcell’s story showcases how commercializing large-scale circular solutions is less about groundbreaking science, but more about sourcing and leveraging existing resources.
Spinning a New Thread
Although European players in P&P and textile manufacturing are exploring textile waste as a new input for pulp and dissolving pulp, the solution to fashion’s textile waste problem still has a long way to go. Scale continues to be a challenge as it involves long-term commitment from suppliers and buyers and requires lofty capacity enhancements. Notably, while massive amounts of waste — a great deal of which is cellulosic — are expected to enter landfills by 2030, companies like Renewcell are working to service 250,000 tons of annual capacity in 2026, presenting an opportunity for Canada’s P&P industry players to step in and meet this growing demand.
Getting on the Same Page
Given the advancements in cellulosic textile-to-textile recycling and its similarity to P&P processes, P&P manufacturers can make the most of their strong pre-existing operations, excess capacity, and strong cash position to invest in cellulosic recycling. With their established at-scale processes to transform raw materials like wood into pulp, P&P manufacturers can achieve cost advantages over newer start-ups to source textile waste as raw material for their pulping processes. Considering the increasing demand for viscose fibres and sustainable consumer goods combined with the large volumes of textile waste, fibre recycling presents an enormous opportunity for value creation for P&P manufacturers.
The Canadian government has implemented initiatives to support innovation toward a circular economy, including research and development funding. Notably, the Canadian government is implementing the Clean Growth Program, which provides $150 million to businesses contributing to more sustainable supply chains. The government is keen to support Canada’s large P&P industry, as seen with the government’s Pulp and Paper Green Transformation Program. The availability of these grants combined with the Canadian government’s commitment to supporting this industry uniquely positions Canadian P&P manufacturers for innovation in this type of recycling process.
Introducing Resolute Forest Products
Existing paper and pulp manufacturing companies are uniquely equipped with capital-intensive assets as well as land, cash, and low debt to invest in future innovation. Facing decline, major forestry companies have sought opportunities for revenue diversification, notably through bio-based materials. An industry that was previously focused on meeting demand through capacity maximization and cost-cutting is now in a race to create new revenue channels; the textile industry, which is seeking sustainable fibres, could represent a fitting opportunity.
Rooting for a Rebound
A leading Canadian producer of paper, wood, pulp, and tissue products, Resolute Forest Products (RFP) has seen its revenue drop 38 percent in the nine years prior to the COVID-19 pandemic. Not only is RFP facing slowing sales, but its ecological reputation has also been tainted by controversy. Between 2013 and 2016, RFP sued eminent environmental activist organization, Greenpeace, for a total of $307 million, alleging racketeering and defamation — suits that were subsequently dismissed. Furthermore, RFP’s Forest Stewardship Council certificates were suspended between 2014 and 2015 due to noncompliance and the company’s reputation has remained tainted ever since.
In recent years, poor financial performance and an acquisition by Paper Excellence has led Resolute Forest Products to sunset mill operations and even list P&P facilities for sale. After years of net losses in the hundreds of millions, such actions have enabled RFP to begin recovering financially. However, with yet another forestry industry downturn on the horizon and competitors like Canfor laying off hundreds of employees, RFP needs an opportunity to keep its mills churning while re-establishing its environmental reputation.
Branching Out to Sustainable Success
Implementing cellulosic recycling would enable RFP to continue recovering financially while realigning corporate action with its commitment to ensuring “sustainability and profitability drive [its] future.” With its parallels to present pulp production processes, minimal modification would be required to transition to recycling cellulosic fibres.
Local, eco-friendly clothing companies like Reigning Champ have achieved record popularity and attest to the considerable demand for Canadian-made activewear. Locally-produced cellulosic fibre-based fabrics, ideal for athletic applications, would undoubtedly be a hot commodity in such markets.
Putting Pen to Paper
Given that transitioning to textile recycling makes strategic sense for RFP, there exist opportunities to renew its business model. First, RFP can repurpose specific plants that are underperforming for textile recycling. Instead of being closed down, they would support RFP’s top-line growth and diversification.
For RFP to establish a sustainable recycling process, a sustainable waste stream supply is essential. Similar to establishing client relations, the company would establish long-term agreements with textile sourcing and sorting facilities. Through consolidated long-term contracts with collectors of textile waste, hospitality companies or garment manufacturers themselves, RFP can establish a long-term textile materials pipeline to fuel its new business model.
Re-leaf for P&P
The crushing volume of textile waste, the increasing demand for viscose fibres, and the lack of existing large-scale circular processes in the fashion industry present a large opportunity for Resolute Forest Products and Canada’s declining P&P manufacturing sector. The similarities between cellulosic recycling and the paper pulping process present a potentially lucrative opportunity for P&P firms while directly solving a pressing need in the fashion industry. As the supply of textile waste is only growing, ultimately textile recycling is a commercially viable and diversified revenue stream for P&P manufacturers.
