Memo Draft

Memorandum 

 

TO:                 Professor Hansen, CEO, AMDP

FROM:          Emily Tsai, Research and Development Analyst, AMDP

DATE:            September 30, 2020                

SUBJECT:     Potential Investment Recommendation – Colorifix                                       

 

As a Research and Development Analyst, I am writing this memo to express my discovery of a potential investment opportunity for the company called Colorifix.  Upon conducting thorough and extensive research, I am recommending Colorifix as the next investment for AMDP. Colorifix is a biotechnology startup in hopes to innovate the textile industry. To begin my formal memorandum proposal, I will first identify the terms from AMDP standard- Triple Bottom line, Corporate Social Responsibility, Social Enterprise, and Carbon Footprint. Then follow by my research in the company background, company vision, potential growth in financials, and expert opinion. To conclude the proposal, I will end with a final recommendation for this potential investment.

 

AMDP Standards

 

Triple Bottom Line

Triple Bottom Line (TBL) is an accounting framework that consists of three dimensions. It is the company’s commitment to focus on social and environmental concerns in alignment to profit. In theory, there should be 3 P’s and together it equates environmental responsibility.

• Profit: This is defined as a traditional measurement of corporate profit (Revenue minus Cost)

• People: This factor measures how socially responsible an organization has been throughout the lifespan as it takes into consideration the business operations such as suppliers, clients, employees, and community.

• Planet: It measures how environmentally responsible a firm has been to prevent pollution, toxic waste, and other harm to mother nature

The main takeaway is that the “Triple Bottom Line aims to measure the financial, social, and environmental performance of a company over time” (Investopedia).

 

Corporate Social Responsibility

A type of business practice that focuses on pursuing financial gains in addition to being socially and environmentally accountable (Investopedia).

Social Enterprise

A business that sets a specific social objective to optimize profits while maximizing the benefit for society and the environment (Investopedia).

Carbon Footprint 

Carbon Footprint is the total amount of greenhouse gases (Carbon Dioxide, Methane, Nitrous Oxide) that is generated by our actions. The carbon footprint is calculated by carbon dioxide equivalent (CO2e). In other words, any emissions that part of a business operation is carbon dioxide equivalent. A reduction in carbon footprint is highly encouraged as it directly correlated to the destruction of our ecosystem, climate, and the planet.

Company Background

“Colorifix is the first company to use a biological process to produce, deposit, and fix pigments onto textiles”. The startup company was founded in Norwich, England in 2016 by three Cambridge University scientists named Dr. James Ajioka, Orr Yarkoni, and David Nugent. The three colleagues were in Nepal’s Kathmandu Valley developing a device to measure pollution in the region’s water” (Chan). Three years later, Colorifix was founded due to the strong passion behind these founders to develop biological sensors to reduce water contamination (Colorifix). 

The company Colorifix specializes in biological dying processes in the commercial coloring of the polyamide-based jersey, polyester, and cotton fabrics. Currently, Colorifix is in the research and development process to apply biotechnology to other natural and synthetic fabrics. The technology used by Colorifix helps convert commodity agricultural by-products into pigments that enable the safe textile manufacturing process. The synthetic biological method created a wide range of naturally produced colors from organisms such as microbes, plants, animals, and insects. The engineered microorganisms transfer beautiful color onto fabric while enabling safe textile production to reduce pollution and minimize the industry’s carbon footprint.

 

Company Vision and Mission Statement

“Our vision is to bring about real change in the textile industry” (Colorifix). Sustainability is at the core of the Colorifix mission statement in hopes to innovate solutions for global problems. The goal involves removing petrochemicals into non-polluting renewable chemistry.

• 10x Less Water

The United Kingdom alone used approximately 20 billion liters of water in the dyeing process. However, Colorific can reduce that to about 10 times less water than the conventional dyeing process. 

• 100% Natural

All of the dyes from Colorifix are biologically produced. The main feedstock is sugar molasses, which is a waste by-product of sugar production available worldwide. The microorganism is fueled by sugar and nitrogen, which replaces the regular chemical.

• Non-Toxic

The dye produced, deposited, and fixed onto the fabrics is without heavy metals, organic solvents, or acids. The additives used by Colorifix are also found in the cosmetics, pharmaceutical, and food industries. The whole process is renewable and non-toxic additive.

“Colorifix source and replicate true colors from nature” (Colorifix). The company focuses on brand quality while providing chemical-free solutions. The dyeing process uses non-toxic addictive, localizing production by reducing transportation cost and carbon emission (Carbon Footprint). The synthetic biology removes harsh chemicals in the creation or deposition of dyes. To meet the demand of consumers, Colorifix innovates the textile industry increasing commitment to the consumers while reducing the environmental footprint resulting in an economical change. Colorifix shows that “water consumption, pollution, and CO2 emissions can be reduced on a huge scale” ( Colorifix). As a company, Colorifix is committed to the triple bottom line, social responsibility, corporate responsibility, and reducing the carbon footprint. These values are rooted in the company’s mission statement as it aligns with the value of AMDP standards.

Financial Growth

Colorifix, a company that revolutionized the textile industry, has raised a Series A round of $3 million from impact and strategic investors by December 2018. Just within 2 years of the launch, the company secured it’s 3 million investment led by Challenger 88 with participation from Cambridge enterprise. The round was headed by Challenger 88, who has strong links in the fashion industry. The top 5 investors at Colorifix include H&M CO: LAB, University of Cambridge Enterprise, WENVEST Capital, SAGANA, and Primera Impact. The fund will support the expansion of the company’s Norwich Research Park-based facility and team-build out (Norwich Research Park).

Expert Sources and Market Opinion

According to CNN, in today’s society, the dyeing industry uses more than 8,000 chemicals such as sulfur, arsenic, and formaldehyde, which all are extremely harmful to wildlife and human health. Colorifix, based in Norwich, England “produces dyes inspired from nature’s blueprint ” (Chan). The insertions of generic information direct the color-making process into bacterial cells making copies every 25 minutes. Although Colorifix is not the only company using biotechnology to create sustainable shades, “Colorifix is the only biotechnology startup aiming to transform dye production and application” (Yarkoni).

In the article “CDP: Fashion Companies Slow to Recognize Water Pollution Risk” by Alyssa Danigelis, the Environmental + Energy Leader CDP data found only seven companies acknowledge water pollution as an issue across the value chain. Colorifix is recognized as one of the seven companies pilot industrial-scale biological dyeing alternatives that use no hazardous chemicals and reduce the usage of water by 90%. The company also requires its supplier to constantly report water performance through the Higg Index, incentivizing high-performance orders, and conducting periodic site visits.

Final Recommendation

Colorifix is a disruptive innovation that changed the textile industry. The company was created to reduce the environmental harm of water pollution in the United Kingdom. This demonstrates social and corporate responsibility as it touches base with the triple bottom line. The constant improvement in the reduction of carbon footprint aligns with AMDP’s business model. The company is decreasing pollution through minimal dye transportation. Therefore, I am hereby recommending Colorifix as the next investment for AMDP. I believe with the rapid growth and strong industry network, Colorifix will be the leader of the textile industry.