The textile and clothing industry is a key driver of economic development in emerging countries, yet it generates significant environmental impacts. With textiles responsible for about 4% of global CO₂ emissions and extensive resource consumption, a sustainable transformation is critical. This study investigates the optimization of the textile supply chain by introducing bast fibers—such as hemp and flax—as sustainable alternatives to cotton, focusing on the specific context of Uzbekistan, a major textile producer with severe water scarcity challenges. A Life Cycle Assessment (LCA) approach was applied, considering system boundaries from fiber cultivation to finished fabric. Impact categories such as water consumption, land use, and freshwater toxicity were analyzed to evaluate environmental performance. In addition, circular economy strategies—including efficient knitting techniques, improved chemical management, and water recycling—were assessed for their potential to modernize industrial practices. Collaborations with German and European institutions provide knowledge transfer on sustainable processing and innovative reuse of biomaterials, such as by-products from silk and linseed production. Preliminary LCA results show that the adoption of bast fibers and circular practices could reduce freshwater toxicity by 31% and land use by 24% compared to conventional cotton-based production. These findings highlight the potential for sustainable supply chain optimization and industrial innovation in Uzbekistan’s textile sector.