The circular economy in textiles requires a transformative lifecycle, starting with design and emphasizing durability, long life, and reuse or recycling. Changes in consumer, public, industry, and authority preferences, such as product sharing, renting, or buying as a service, are necessary to increase utilization while maintaining economic viability. The textile sector has a significant environmental impact due to its linear and intricate nature, including the cultivation of natural fibers, spinning and sizing fabrics, fine-tuning, printing, and dyeing of finished products. The textile manufacturing process in Europe has a significant impact on agricultural land and the alteration of natural land, especially in relation to natural fibers like cotton. The textile industry accounts for 30–50% of greenhouse gas emissions from the supply chain, positioning textiles as the sixth most environmentally detrimental category among home products in the European Union. The establishment of a textile circular economy requires inventive corporate strategies, environmental practices, and legislative measures throughout the entire value chain. Circular economy principles encompass several stages of a product's life cycle, including design, production, marketing, consumption, waste management, reusing, and recycling. To achieve a sustainable transition, substantial modifications are required throughout all phases of the product's life cycle. The efficacy of circular business models heavily relies on the capabilities of the supply chain and network infrastructure. The integration of circular economy ideas into a company's long-term strategy and implementation necessitates a fundamental transformation inside the organization. Digital technologies, such as IT devices, robots, and mobile applications, have the potential to support a transition towards circular economy, improving product design, consumer engagement, and service offerings. Future studies should prioritize the use of digital technologies in the textile and garment industry, specifically in the domain of circular economy (CE), such as smart mirrors, 3D printing, and AI.