Swedish textile recycler Renewcell said Sunday it filed for bankruptcy after failing to secure sufficient long-term funding to continue operations.

The company launched a strategic review in November, after it emerged that demand for its recycled raw material was much weaker than expected. It managed to raise $10 million in short-term funding from investors and lenders (including its biggest shareholder, H&M) in December. But efforts to secure further investment have proved unsuccessful.

The situation marks a blow to efforts to introduce new, more sustainable materials to the market at scale. Renewcell, which developed technology to recycle used cotton textiles into a feedstock for yarns like viscose and lyocell, was an early mover in the space and viewed as a litmus test for others.

“This is a sad day for the environment, our employees, our shareholders, and our other stakeholders, and it is a testament to the lack of leadership and necessary pace of change in the fashion industry” Renewcell board chairman Michael Berg said in a statement.

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