H&M Group inks multi-year deal with Circulose

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H&M Group has signed a multi-year deal with next-gen material producer Circulose, aiming to replace a "substantial share" of the virgin viscose used across its brands, including H&M, Cos, Weekday and Arket with Circulose's recycled alternatives.

This is the third brand partnership that Circulose (formerly Renewcell) has unveiled this week, and is among the first since it relaunched under a new name and leadership in June 2024, following its February 2024 bankruptcy. The other two agreements are with fast fashion giant Mango and emerging designer Patrick McDowell.

Circulose says the H&M and Mango partnership has a similar structure and level of ambition, but with differences in sourcing volume reflective of each party. The partnership with Patrick McDowell is more of a design play, co-developed with several suppliers to "demonstrate the performance and versatility of Circulose in finished garments".

H&M Group declined to share the specific scope of its agreement, but says it will source "significant volumes" of Circulose's next-gen viscose alternative made from recycled cotton. The initial focus is on replacing virgin viscose with Circulose-made viscose, and in some cases substituting cotton with Circlose's lyocell or viscose. Cotton isthe group's most-used material at 55 per cent of its total fibre basket, while wood and man-made cellulosic fibres represent 8 per cent altogether.

The Swedish retailer was an early supporter of Circulose, investing in the startup as it attempted to reach commercial scale, and incorporating it into its collections from 2020 (back when it was called Renewcell) under the leadership of former H&M Group CEO Helena Helmersson, who is now Circulose's chair. This new partnership has been in the works since January.

"We were pioneers back in 2020 when we first brought fashion made from Circulose to our customers," says Cecilia Strömblad Brännsten, H&M Group's head of resource use and circularity. "Today, we're excited to deepen this partnership. Investing in next-generation materials is essential to achieving our goal: ensuring that 100 per cent of our materials are recycled or sustainably sourced by 2030. Scaling access to these solutions is key to accelerating the shift towards a circular economy for fashion."

From offtake agreements to licensing

Circulose says the partnership with H&M Group reflects its shift in commercial strategy, which is focused on brand collaborations, operationalising Circulose's viscose and a new licensing-based pricing model, which was developed in partnership with innovation accelerator Fashion For Good and sustainable forestry non-profit Canopy to reduce friction as it aims to scale. This has been essential to winning brand support and making the solution viable: when the company filed for bankruptcy in February 2024, it cited issues with funding and production.

"We have changed our entire go-to-market approach based on the lessons from Renewcell. We're now focusing on building deeper partnerships with brands that can drive meaningful volume," Jonatan Janmark, CEO of Circulose, tellsVogue Business.

That means offering new types of support to help brands seamlessly integrate Circulose into their existing supply chains, including implementation planning, supplier coordination and material traceability, which Janmark says are "essential building blocks for success when the ambition is to go beyond small-scale pilots".

The structure of the agreements is different from a traditional offtake agreement, which next-gen materials companies often use to secure bank financing for new capital investments. "We already have a factory so we don't need offtakes that satisfy the bank demands when raising debt. This puts us in a uniquely strong position among next-gen materials, which we've leveraged to create a partnership structure that is more flexible and attractive to brands," says Janmark. "It still involves [a] volume agreement that satisfies our need for demand certainty, but in a more pragmatic and flexible way."

The licensing fee brands now must pay to access Circulose materials will allow the company to cover its overheads and offer the material at a lower price, which Janmark says is "very close to virgin viscose or cotton" -but only for licensing partners. This has been made possible by the company securing "more competitive pulp prices than ever before", Janmark adds, although he declined to share exact figures.

"For a commercial-scale plant like ours, running at high utilisation is essential - both economically and in terms of consistent product quality," he continues. "One of the key factors behind Renewcell's bankruptcy was insufficient demand. We're determined not to restart production until we have the necessary demand secured."

That factory is currently closed. The company is still working through inventory from Renewcell's final production runs, and is aiming to restart production before that stock runs out - "but not prematurely", Janmark flags. "Our current view is that we will deliver new pulp during the second half of 2026. However, reaching that milestone requires that more brands step up - as H&M Group and Mango have done - to help us bridge the scale-up gap and make circular textiles at scale a reality."