Deep dive: Fashion and textiles — what's working, what's not, and what's next

In 2024, the global fashion industry reached a stark inflection point: while the textile market surged to $618 billion with 132 million tonnes of fibre produced annually, 85% of all textiles still ended up in landfills or incinerators (Geneva Environment Network, 2024). Less than 1% of clothing is recycled into new clothing, and the sector now accounts for 8-10% of global greenhouse gas emissions—more than international aviation and maritime shipping combined. The sustainable fashion market, valued at $10.4 billion in 2024, is projected to reach $22.5 billion by 2032, yet this represents barely 1.7% of the fast fashion market's $150.8 billion valuation. This disparity underscores both the magnitude of the challenge and the unprecedented commercial opportunity for founders who can close the gap between consumer sustainability intentions and actual purchasing behaviour.

Why It Matters

The fashion and textiles sector presents one of sustainability's most complex intervention points. The industry employs 430 million people globally, predominantly women in developing economies, making it a critical lever for both environmental and social outcomes (UNEP, 2024). The environmental stakes are considerable: textile production consumes 79 billion cubic metres of water annually, with 20% of global clean water pollution originating from textile dyeing and treatment processes.

The urgency has intensified with new regulatory frameworks. The European Union's mandatory separate textile waste collection came into force in January 2025, while the EU Ecodesign for Sustainable Products Regulation (ESPR) will require digital product passports for textiles by 2027. The UK is developing its own Extended Producer Responsibility (EPR) scheme for textiles, with consultation ongoing through 2025. These regulatory tailwinds are creating both compliance pressure and market-making opportunities.

For founders, the sector offers attractive unit economics at scale: resource efficiency gains of 20-25% are achievable in sustainable textile production, and the resale market is growing at 3.4x the rate of traditional retail. However, only 18% of fashion executives currently rank sustainability as a top-three priority—signalling significant greenfield opportunity for solutions that bridge the intention-action gap.

Key Concepts

Circular Textile Systems

Circularity in textiles encompasses design-for-disassembly, fibre-to-fibre recycling, and extended product lifecycles. Unlike downcycling (where textiles become insulation or rags), true circular systems maintain material value across multiple product cycles. The critical bottleneck is mixed-fibre separation: polycotton blends constitute over 35% of textiles but are notoriously difficult to process, requiring advanced hydrothermal or enzymatic technologies.

Material Hierarchy and Additionality

Sustainable material sourcing follows a preference hierarchy: (1) recycled post-consumer textiles, (2) recycled pre-consumer waste, (3) certified organic or regenerative virgin materials, (4) conventional virgin materials. Additionality—the principle that sustainability interventions should generate outcomes beyond business-as-usual—is increasingly scrutinised by investors and regulators evaluating claims of environmental benefit.

Textile-Specific KPIs

The following table outlines sector-specific key performance indicators for fashion sustainability ventures:

KPI	Definition	Baseline Range	Leading Practice
Fibre-to-Fibre Recycling Rate	Percentage of textile inputs from textile waste	<1% (industry avg)	>30%
Water Intensity	Litres per kg of finished textile	100-200 L/kg	<50 L/kg
Carbon Intensity	kg CO₂e per garment	10-25 kg CO₂e	<5 kg CO₂e
Chemical Transparency	Percentage of inputs with disclosed chemistry	<20%	>80%
Living Wage Coverage	Suppliers evidencing living wage payment	7%	>50%
Utilisation Rate	Times worn before disposal	7-10 wears	>50 wears

What's Working and What Isn't

What's Working

Advanced recycling technologies are achieving commercial scale. Ambercycle's molecular regeneration technology, which converts textile waste into regenerated polyester (cycora®), secured multi-year partnerships with H&M Group, Inditex, and Ganni in January 2025. Circ's hydrothermal process for separating polycotton blends has moved beyond pilot phase with Adidas and Levi's as anchor customers. These technologies address the historically intractable problem of mixed-fibre recycling, unlocking circular pathways for the 35% of textiles that contain polyester-cotton blends.

Regulatory-driven transparency is accelerating digital infrastructure. The EU Digital Product Passport (DPP) requirement is catalysing investment in supply chain traceability. Brands are now competing on transparency as a differentiation strategy rather than viewing it purely as compliance cost. This shift has created tailwinds for startups like Resortecs, whose SmartStitch dissolvable thread enables garment disassembly for recycling—a critical enabler for circular systems.

Pre-competitive collaboration is delivering measurable impact. The Fashion Climate Fund, a $250 million initiative launched by the Apparel Impact Institute, has unlocked $2 billion in blended capital and supports 45+ brands and their suppliers in implementing emissions reduction programmes. Inter-brand collaborations increased 35% year-over-year in 2024, signalling industry recognition that systemic challenges require collective action.

Resale and rental models are proving unit economics. The secondhand clothing market is projected to reach $64 billion within five years, with platforms demonstrating that extended product lifecycles can be profitable. Rental models, while more operationally complex, are achieving positive customer lifetime values in specific categories including occasion wear and childrenswear.

What Isn't Working

Recycled content remains negligible at system level. Despite significant investment, only 8% of fibres used in 2023 came from recycled sources, and less than 0.3% of the 3.25 billion tonnes of textile materials in circulation comes from recycled resources. The gap between pilot success and industry-wide transformation remains vast, constrained by collection infrastructure, sorting capacity, and virgin material price competitiveness.

Consumer behaviour lags stated intentions dramatically. While 70%+ of consumers express concern about fashion sustainability, only 3% would pay a premium for sustainable products. The Gen Z paradox is particularly acute: 94% support sustainable clothing in surveys, but 62% shop fast fashion monthly, spending an average of $767 annually at fast fashion retailers. This intention-action gap represents the sector's most persistent challenge.

Greenwashing undermines market credibility. EU analysis in 2024 found that 59% of sustainability claims in fashion were vague, misleading, or unverifiable. Zero major brands achieved full supply chain traceability according to the Fashion Transparency Index 2024. This erodes consumer trust and creates adverse selection problems where genuine sustainability investments are undervalued relative to marketing-driven claims.

Labour conditions remain structurally problematic. While environmental metrics attract investor attention, social outcomes lag: 93% of surveyed brands cannot evidence payment of living wages to supply chain workers. The industry's fundamental business model—predicated on labour cost arbitrage across global supply chains—creates structural barriers to meaningful improvement.

Key Players

Established Leaders

Patagonia remains the sector's most credible sustainability leader, with established circular programmes (Worn Wear), supply chain transparency initiatives, and consistent advocacy for reduced consumption. The company's 2022 ownership restructure—transferring all shares to climate-focused trusts—provides a governance template for mission-aligned fashion businesses.

H&M Group has made substantial sustainability investments, including $100 million committed to circular innovation through its venture arm CO:LAB. While critics note the tension between sustainability commitments and fast fashion volumes, H&M's partnerships with Ambercycle, Smartex, and other technology providers demonstrate meaningful capital deployment.

ASICS, Marks & Spencer, and H&M are among only four of 250 brands meeting UN Fashion Charter climate targets, according to 2024 assessments—indicating the significant gap between industry rhetoric and measurable performance.

Emerging Startups

Ambercycle (US) has emerged as a leading textile recycling technology company, with its cycora® regenerated polyester now adopted across multiple major brand partnerships including a four-year deal with Ganni announced in January 2025.

Circ (US) addresses polycotton separation, a critical bottleneck, through proprietary hydrothermal technology. Partnerships with Adidas and Levi's provide commercial validation for its approach.

Infinited Fiber Company (Finland) raised $43.7 million in March 2023 from investors including Inditex (Zara's parent company) and TTY Management for its textile regeneration technology, demonstrating strategic investor appetite for circular fibre solutions.

Resortecs (Belgium) takes a design-for-disassembly approach with its SmartStitch dissolvable thread, enabling easier garment recycling. Partnerships with major fashion labels validate the model.

Renewcell (Sweden) developed Circulose®, a regenerated cellulose fibre from textile waste, demonstrating commercial-scale textile-to-textile recycling, though the company's 2024 financial difficulties highlight the challenge of scaling capital-intensive recycling infrastructure.

Key Investors and Funders

Lightspeed Venture Partners has emerged as a leading fashion technology investor, leading the $24.7 million round for Smartex in 2022 alongside H&M and Tony Fadell.

Fashion For Good operates both an accelerator programme (supporting 100+ startups over nine-month cycles) and investment vehicle, backed by corporates including Adidas, C&A, Target, and Walmart.

The Fashion Climate Fund at Apparel Impact Institute represents the largest blended finance vehicle specifically targeting fashion decarbonisation, unlocking $2 billion from its initial $250 million.

UK Research and Innovation (UKRI) has issued over 400 grants for circular economy initiatives, with textile innovation a priority area under the £30 million Smart Sustainable Plastic Packaging challenge and related programmes.

European Innovation Council (EIC) Accelerator provides up to €2.5 million in grants plus equity for deep-tech sustainability ventures, with textile biotechnology qualifying under multiple priority areas.

Examples

Ambercycle and Ganni Partnership (2025): In January 2025, Danish fashion brand Ganni signed a four-year partnership with Ambercycle to incorporate cycora® regenerated polyester into its collections. This represents a shift from one-off capsule collections to integrated supply chain transformation, with Ganni committing to scaling regenerated materials across product categories. The partnership structure—multi-year with volume commitments—provides Ambercycle the demand certainty required to invest in production capacity.
Re-Fresh Global's Rapid Scale-Up: Re-Fresh Global achieved the rare feat of moving from pilot to commercial-scale textile recycling within 18 months, using enzymatic hydrolysis to separate cellulose and synthetic components. Their Re-Nano™, Re-Thanol™, and Re-SanPulp™ products demonstrate how biotech approaches can generate multiple revenue streams from single feedstocks, improving unit economics compared to single-output recycling models.
H&M's Smartex AI Integration: H&M's investment in Smartex, an AI-powered defect detection system for textile manufacturing, exemplifies how technology can reduce waste at the production stage rather than post-consumer. Early deployments showed 20-25% reductions in manufacturing waste—addressing the 15% of textiles that never reach consumers due to production defects. The partnership, backed by Amazon Web Services' Climate Fellowship, demonstrates corporate-startup collaboration models that deliver mutual value.

Action Checklist

Conduct material flow analysis to quantify current recycled content, virgin material dependencies, and waste streams across your product portfolio
Map regulatory exposure: assess ESPR, EPR, and Digital Product Passport requirements against current capabilities and identify compliance gaps
Evaluate supplier living wage practices using tools such as the Fair Wear Foundation's methodology or the Wage Indicator database
Pilot one circular business model (resale, rental, or take-back) in a single product category to generate baseline data on unit economics and customer response
Establish chemical transparency baseline using industry frameworks such as ZDHC (Zero Discharge of Hazardous Chemicals) or bluesign®
Engage with pre-competitive initiatives (Fashion Climate Fund, Fashion For Good) to access shared learning and reduce individual R&D costs

FAQ

Q: What is the business case for sustainable fashion when fast fashion continues to grow rapidly? A: While fast fashion is projected to reach $291 billion by 2032, sustainable fashion is growing at 10-23% CAGR compared to 6.8% for conventional textiles. More critically, regulatory trends (EU Ecodesign, EPR schemes, DPP requirements) are creating compliance costs that will disproportionately impact non-sustainable models. Early movers in sustainability will have lower adaptation costs and can capture the growing consumer segment—particularly Gen Z, where 73% express willingness to pay more for genuinely sustainable products.

Q: How can startups compete with established brands' sustainability investments? A: Startups hold advantages in specific niches: technology-first approaches (recycling innovation, AI waste reduction), digital-native circular models (resale platforms, rental services), and material innovation (bio-based alternatives). Established brands increasingly seek startup partnerships rather than in-house development, creating B2B opportunities. Focus on proprietary technology, capital-efficient business models, and demonstrable impact metrics that enable brand partnerships.

Q: Why has textile recycling not achieved scale despite decades of attention? A: Three structural barriers persist: (1) collection and sorting infrastructure remains underdeveloped, with only 20% of textiles collected for reuse/recycling; (2) mixed-fibre separation technology has only recently achieved commercial viability; and (3) virgin polyester prices, suppressed by cheap oil derivatives, undercut recycled alternatives. The EU's 2025 mandatory textile collection and emerging EPR schemes are designed to address the first barrier, while technology maturation is addressing the second.

Q: What metrics should investors prioritise when evaluating fashion sustainability startups? A: Beyond financial metrics, prioritise: (1) lifecycle assessment data demonstrating quantified impact reduction; (2) brand partnership commitments that de-risk demand; (3) regulatory tailwind alignment (ESPR, EPR, DPP); (4) technology readiness level for deep-tech plays; and (5) additionality—evidence that the solution delivers outcomes beyond what would occur through market forces alone.

Q: How significant is the greenwashing risk for sustainability-focused fashion ventures? A: Greenwashing risk is substantial and increasing. EU regulators found 59% of fashion sustainability claims unverifiable in 2024, and litigation risk is escalating. Ventures should invest in third-party verification, maintain conservative communications relative to actual performance, and build measurement infrastructure from inception. The Green Claims Directive, expected to be enforced from 2026, will require substantiation for all environmental claims.

Sources

Geneva Environment Network. (2024). Environmental Sustainability in the Fashion Industry. Retrieved from genevaenvironmentnetwork.org
UNEP. (2024). Sustainability and Circularity in the Textile Value Chain. United Nations Environment Programme.
Fashion Transparency Index. (2024). Annual Report. Fashion Revolution.
European Environment Agency. (2024). Textiles and the Environment: The Role of Design in Europe's Circular Economy.
Fortune Business Insights. (2024). Sustainable Fashion Market Size and Share Report 2024-2032.
Apparel Impact Institute. (2024). Fashion Climate Fund Progress Report.
Fulgar S.p.A. (2025). 2024/2025 Performance Review and Trends in the Textile Industry.
European Commission. (2024). Green Claims Directive: Impact Assessment on Textile Sector.