By Päivi Petänen, Hannamaija Tuovila & Annu Markkula. VTT Technical Research Centre of Finland.
How does the market environment of sustainable fashion business models look like currently and in the future? In CRAFT-IT4SD, we interviewed 14 sustainable fashion companies in Finland, Romania, Spain and Denmark in 2024-2025 to find out how they perceive their current and future roles in the fashion market and what are the key challenges and opportunities they encounter. We discovered that sustainable fashion companies operate in a dynamic and increasingly complex market environment, navigating intense competition, rapid technological change, cultural aspects, and evolving regulatory frameworks. At the same time, the growing demand for sustainable alternatives presents significant opportunities to influence and shape a more sustainable fashion industry.
The complexity of competition
The sustainable fashion landscape is a maze of competition. Fast fashion remains a strong competitor due to its low prices and market dominance. A key distinction is, however, that sustainable brands often target different consumer segments. At the same time, competition can emerge even between sustainable alternatives, increasing complexity. For example, fashion rental services often feature the same brands that are considered competitors. Despite this, many sustainable fashion companies emphasize collaboration over competition, aiming to drive systemic change rather than outperform each other.
Who owns the sustainability narrative?
Sustainable fashion companies envision significant growth potential for sustainable fashion alternatives in the coming years. Many believe that increasing consumer awareness about sustainability could help transition the industry from niche to mainstream acceptance. However, there are concerns over the dominance of large fast fashion brands. With their financial power and scalability, fast fashion could take control of sustainability narratives, leaving smaller, more authentic brands struggling to make an impact. Fast fashion brands are expected to integrate sustainability into their messaging—sometimes genuinely, other times superficially through greenwashing. While this reflects the rising demand for sustainable fashion, it poses challenges for smaller sustainable brands seeking to differentiate themselves.
Embracing technology to drive change
Technological advancements present multiple opportunities for sustainable fashion. Innovations like 3D printing, laser cutting, and bio-based materials offer avenues to minimize waste and enable flexible, small-scale production. Developments in textile recycling and sustainable manufacturing technologies are also instrumental in helping smaller businesses scale efficiently and compete effectively.
Emerging business models
Alternative business models, including fashion rental, made-to-order production, and second-hand clothing, are gaining momentum. These approaches resonate with circular consumption principles and attract consumers seeking sustainable options. To thrive, sustainable fashion companies must adapt to evolving consumer preferences and embrace innovative consumption models such as access-based fashion as part of their offering.
Increasing regulation: an opportunity and a burden
Sustainability-focused legislation is seen as both an opportunity and a burden. Stricter regulations can encourage industry-wide adoption of sustainable practices but may also negatively affect smaller companies, which often lack the resources for compliance. Targeted support, including funding, mentorship, and guidance are needed to help these companies balance day-to-day operations with strategic planning.
The battle against low quality
As fast fashion continues to dominate, a culture of low-quality, disposable clothing is fostered. This trend diminishes the value of second-hand fashion and discourages consumers from caring for pre-owned items. Addressing these cultural barriers and promoting a shift toward quality and durability is pivotal for the long-term success of sustainable fashion.