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Spinnova, Patagonia Show Sustainability Requires All Hands on Deck

Scaling sustainability is a team effort.

While one fiber innovator is seeking new opportunities to scale its business via joint ventures, an eco-friendly apparel brand aims to improve its sustainability offerings in partnership with a material science startup.

Spinnova’s first earnings report as a public company saw revenue rocket 325.3 percent in the first half of 2021 to 370,000 euros ($435,000) from 87,000 euros ($102,200) in the year prior.

The Finnish material innovator, which has forged links with Adidas, H&M and most recently The North Face, aims to capture share in what it describes a 200-billion-euro ($235 billion) global textile fiber market. But it appears the sustainable fiber marker’s success might hinge on the accomplishments of its joint ventures, according to CEO and co-founder Janne Poranen.

“I’m always believing that when you are trying to do something what we are now planning to do—bringing a totally new technology and totally new product into the global scale, and into the market—you need partners to do that. We don’t believe that we can do that alone,” Poranen said.

The Finland-based textile producer has two 50/50 ventures: one with Brazilian wood pulp manufacturer Suzano, and the other with leather producer KT Trading, which is the primary leather partner of the Ecco footwear brand.

The Suzano JV, called Woodspin, is expected to produce 1 million metric tons of fiber annually by 2031. Poranen reaffirmed that the first commercial facility for the venture will be completed in Jyväskylä, Finland, by the end of 2022.

Ari Borg, strategic projects director of Suzano Europe, described Spinnova as the ideal partner to scale due to its “innovability,” which he described as the combination of innovation and sustainability. The wood pulp producer has goals of its own to sell 10 million tonnes of sustainably sourced products, which will replace fossil fuel-based products.

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“Next to the Woodspin factory, we’re building the micro-fibrillated cellulose factory, which is Suzano’s first productive investment outside Brazil, so I think that’s a real milestone for us,” Borg said in an investor presentation.

Poranen said the KT Trading venture, known as Respin, already contributes the majority of Spinnova’s revenue due to technology sales, which were recognized this half for the first time.

The remaining revenue came from ongoing R&D services that Spinnova provides to its partners, chief financial officer Ben Selby said. R&D services were traditionally the main source of revenue for Spinnova in the “pre-commercial” phase of its business, Selby said.

The revenue figures omitted 2.5 million euros ($2.9 million) in advance payments made from the Woodspin and Respin ventures that will be recognized in later periods.

On a year-over-year basis, Spinnova has 49 permanent employees, nearly double last year’s 28. The changes largely came in the growth of Spinnova’s R&D and commercial departments, according to Selby. The hires are a big part of the 1.8 million euros ($2.1 million) spent on personnel expenses, which were the largest contributor to the company’s 3-billion-euro ($3.6 million) operating loss in the half.

Overall, net losses amounted to 10.4 million euros ($12.2 million), with 7.3 million euros ($8.6 million) in IPO-related expenses the primary culprit, Selby said.

The circular fiber maker believes its advantage will come from its diversified set of three main earnings streams: technology sales, fiber sales and fabric sales.

The first bracket encompasses sales of Spinnova’s technology platform exclusively to the joint venture companies and in the future potentially selling its technology platform to other parties.

“In the case of Woodspin, in the future we will receive a recurring technology fee based on the joint venture’s operating cash flow,” said Selby.

Both Woodspin and Respin produce Spinnova wood and leather fiber using the platform, before selling it to textile brands. Fiber sales amount to 50 percent of both joint ventures’ profits, Selby said.

Spinnova also aims to establish its own commercial branded fabric production supply chain by selling fabrics to fashion brands and other buyers, in effect becoming “the Gore-Tex of sustainability,” Selby said.

While the wood and leather producer is targeting positive EBIT in the medium term, it aims to generate more than 200 million euros ($235 million) of EBIT in the long run, and a cumulative 1 billion euro ($1.2 billion) cash margin from technology sales.

And while the raw material manufacturer wants 20 brand partnerships using Spinnova goods by 2027, the goal is to reach 80 by 2033.

For now, Porannen wouldn’t give an exact split of wood, leather and textiles, but indicated that wood would be the larger of the two, as “the global volumes in leather are much smaller than the wood pulp.”

Wood and leather are the standout materials that comprise Spinnova’s 100% recyclable, quickly biodegradable fibers, but the company’s production technology can also use additional raw material inputs such as agricultural, food and beverage industry waste and textile waste.

Patagonia partners with material science firm

With sustainability-driven investments from the likes of Ralph Lauren and Allbirds under its belt, material sciences company Natural Fiber Welding, Inc. (NFW) has yet another eco-conscious brand on its side. NFW is collaborating with Patagonia as part of a commitment to develop and scale circular textile solutions.

“The ability to incorporate recycled natural fibers in a textile that is durable and has enhanced performance is an exciting and very innovative technology with potential for high impact in the industry,” said Sara Hayes, director of materials development of Patagonia. “NFW’s fiber welding technology enables entirely natural materials to provide synthetic-equivalent performance properties, such as abrasion resistance and moisture management.”

A creator of all-natural, plastic-free alternatives to materials such as leathers, foams and textiles, NFW unveiled its first product in the marketplace, Mirum, with the intent to free product designers of the constraints inherent in using synthetic materials. Mirum is made with natural polymers, and will be used in an upcoming Allbirds shoe, the companies said earlier this year. NFW says its finished materials are never coated in polyurethane and use no synthetic binders.

NFW, which develops technologies based on the sustainable use of plants and natural fibers to create durable goods and textiles, is entering the Patagonia partnership as it rails against a chief concern of the materials industry. Many still rely on plastics and plastic coatings to achieve the level of performance needed for activewear and other high-durability merchandise.

The company’s patented technology platform, Clarus, is designed to use a closed-loop chemistry process to engineer yarn structures, allowing natural fibers to compete with synthetics. Because the recycled yarns are composites of 100 percent natural materials, Clarus fibers are entirely recyclable and designed for endless circulation.

“When it comes to performance, we’ve learned that nature does it best. We have been able to decisively prove that not only can natural materials perform just as well as synthetics, but unlike plastic-based materials, they can also sustainably scale,” said Luke Haverhals, CEO and founder of NFW. “That’s why we’re thrilled to collaborate with Patagonia, who has long been a leader in demonstrating both the importance and the power of nature.”

NFW also recently raised $15 million in funding from BMW i Ventures, the venture arm of luxury vehicle maker BMW Group, and other partners to enable the startup to scale commercial production of sustainable performance materials for automotive applications and beyond.