The textile and clothing (T&C) industry accounts for about 10% of global carbon emissions and 20% of wastewater. From fields to fast fashion, the journey of a single T-shirt can leave behind a trail of environmental damage. Producing just one pair of jeans uses up around 7 500 litres of water – the amount one person drinks over seven years. Meanwhile, synthetic fibres shed tiny plastic particles, adding to the estimated half a million tonnes of microplastics entering the oceans each year. As the fashion cycle accelerates, so too does its environmental footprint – and the need to change our approach.
Portugal’s problem – and it’s prize
Portugal has a thriving T&C industry, sustaining 12 000 companies 132 000 employees in 2022 and generating EUR 8.86 billion of turnover, nearly 70% of which from exports. Portugal’s T&C industry is also significant at EU level, generating 10% of the EU’s T&C jobs and 5% of its turnover.
Most of this value is created by SMEs, which account for 87% of Portugal’s T&C employment. Greening the industry will therefore require a concerted policy effort to change the minds and methods of Portugal’s SMEs. But if it succeeds, Portugal’s prize could be not just a cleaner country but cornering the market on swathes of new eco-conscious customers.
Portugal has the highest intensity of T&C employment over total manufacturing employment across all EU member states.
SMEs are by far the main source of jobs in Portugal’s textile and clothing industry
Note: Only countries with a significant share of T&C employment in total manufacturing employment have been retained for this graph (i.e. above the EU average of 4%). However, there is no information on T&C employment by firm size for Estonia and Greece.
Transitioning textiles
As shown in the recent OECD report on “The green transition of SMEs and Entrepreneurship in Portugal”, efforts are well underway – from the development of bio-based materials to better water management, decarbonisation, and circularity.
With support from the national Recovery and Resilience Plan, and the technical coordination of CITEVE (the Portuguese Tech centre for T&C industries), Portugal’s T&C companies are running to achieve innovations to maintain their competitiveness in a global and aggressive market.
First, through remarkable investments in eco-friendly materials. Examples include forestry byproducts, where cellulose extracted from trees is transformed into biodegradable fibres like lyocell, strong and versatile alternative to synthetic materials. Other companies are recycling agricultural waste such as corn husks, grape skins, and other organic waste to produce natural fibres and dyes. Algae-based textiles, which use algae to create biodegradable fabrics, are another innovation that reduces reliance on petroleum-based products.
Water use, a carrier to chemicals and energy consumption, is also being addressed. Some firms, supported by recent IT and automation developments, are introducing breakthrough technologies addressing closed-loop water systems that capture, treat, and recycle water used in production processes, significantly reducing water consumption and discharge. Businesses are also investing in rainwater collection systems to supplement water supplies and deploying innovative polymer particles that cut water and energy use during dyeing.
Digitalisation is the key to making manufacturing and business processes more productive and transparent. Several companies, together with their scientific and technological partners, are investing in breakthrough solutions, introducing robotics and AI-based systems to enhance both efficiency and transparency – including the adoption of the Digital Product Passport (DPP).
Portugal is also embracing renewable energy and low-carbon technologies. On top of the fact that Portugal has one of the highest rates of renewable electricity production in the world, many T&C factories have installed their own solar, wind and biomass systems to power operations, while machinery upgrading is helping manufacturers lower their carbon footprint by reducing energy consumption.
Over the past decade, Portugal has emerged as a hub for circular fashion. In the Northern Region – where nearly 90% of the country’s T&C industry is concentrated – several companies are recycling industrial waste and discarded garments into high-quality secondary raw materials, feeding others with inputs to manufacture premium textile-based products, while also supporting retailers in expanding more sustainable offerings in their stores.
Scaling up sustainable practices
Despite these innovative projects and intense investments performed by companies, consolidating a sustainability-oriented T&C Industry is a huge challenge.
For many SMEs, the upfront cost of new production systems, process changes and certifications remains a major hurdle, in a context where the competition with less sustainable products is very hard. Without long-term support or reliable access to finance, green ambitions can stall. As public budgets tighten, maintaining incentives to “go green” will require careful balancing.
Consumer trust is another challenge. Misleading environmental claims and a lack of clear labelling can confuse buyers, meaning that truly sustainable businesses struggle to stand out. Without greater transparency and regulation, greenwashing risks undermining the whole transition.
Lastly, building sustainable supply chains – sourcing traceable, low-impact materials and reducing emissions from transport – demands strong partnerships and careful coordination across borders. For SMEs, this can be especially costly and complex.
A fresh look for fashion
Portugal’s experiments demonstrate that a lot of technologies to green the textile and clothing (T&C) industry or already exists, but innovation alone is not sufficient. To achieve real impact, these efforts must be scaled up and systematically embedded into the business models of SMEs across the value chain. Policymakers have a critical role to play in creating stable incentives, strengthening regulatory frameworks, and investing in support networks that help SMEs move from pilot projects to widespread practice. Consumers also hold significant influence, by rewarding transparency and supporting brands that demonstrate genuine sustainability commitments.
As Portugal illustrates, the green transition of the T&C industry is not only a climate imperative but also a business opportunity: to reshape production, secure local jobs, and capture the growing global demand for sustainable fashion. With SMEs at the heart of the sector, the transition must be driven bottom-up – but it equally requires coherent top-down policies and regulations to ensure a fair and competitive business environment.
If you would like to dive deeper into this topic, take a look at the full report – ‘The Green Transition of SMEs and Entrepreneurship in Portugal’ – here. Moreover, find further reading on the related topics of ‘Finance and investment for greening SMEs’ and ‘Greening SMEs’.
