"Gen Y and the Millennials are really driving this trend," says Barbie M. Casasus, senior director and consumer strategist at Iconoculture, based in Minneapolis, adding that 20- to-28-year-olds represent about $520 billion in buying power and say they are willing to pay more for organic and fair-trade products. "And they're pretty passionate about it. While it's a category that is still in its infancy, the demand is growing."

For years, clothing has lagged behind other industries. And it's hard to deny that "green fashion" is oxymoronic: The environmental police demand that consumers reuse and recycle, while the fashion cops urge shoppers to cast off anything left over from last season. So it's hardly a shocker that the government estimates that each American throws away about 68 pounds of clothing and textiles each year.

"After all, the entire fashion industry is predicated on planned obsolescence," says Ian Yolles, VP/brand communication for Nau, a Portland, Ore.-based clothing company launched last year by a group of former Nike and Patagonia executives.

But these days, younger women are determined to find a way to navigate the two worlds. In fact, Iconoculture's research has turned up four distinct shopping types. "We call the first type the Living Green consumer, who has embraced the whole concept of the environmental lifestyle and is driven by dedication, purity and awareness," says Casasus. "She is the most likely to be eating organic foods. She's finding new ways to use her old clothes, shopping vintage and thrift shops, and buying clothes made of recycled fabrics."

Second, there is the core fashionista, "who is looking to build up the green in her fashion portfolio," she says. While this shopper wouldn't be caught dead in a hemp dress or tire-tread sandals, "she is rethinking and redefining her sense of style and eco-chic. She sees herself in a power position, and isn't a slave to any trend. She's picking and choosing, looking to make small modifications."

Third, Iconoculture has identified a group called Walking Green consumers, "driven by wanting to belong to a greater community. These are trend followers."

And finally, she says, there is the Spending Green profile, the shopper who buys green clothes because "that sense of exclusivity and entitlement are important to her. She embraced green when it was still very much a luxury category, and she intends to keep it that way. For her, buying green connotes luxury, not any kind of sacrifice."

Of course, companies navigate these types differently. Nau, for example--which launched last year with four stores and is opening an additional 10 this year--doesn't make a big deal about the environmental soundness of its clothing. "Customers are coming to us for performance wear and also for excellence in design," Yolles says. "The fact that we consider every aspect of sustainability in our products--from not choosing bright colors because they require more chemicals to making sure every garment can be recycled after its 10-year-lifespan, even garments that can be washed in cold water--isn't necessarily the main selling point."

Still, the company devotes a tremendous amount of energy to explaining its philosophy to potential consumers. "Up until now, conversations about green clothing have always centered on the fabric," Yolles says. "But there's so much more. You can take organic cotton and put some pretty toxic dyes on it."

Eventually, Casasus says, as consumers become more educated about the complexities of the garment business, they will want to know about all those details. "They'll begin to demand the same level of transparency from clothing companies that they now expect from food," she says. One of her favorite examples is Flocks, a small knitwear company that tags all its garments with information about the precise sheep, goat or bunny that provided the yarn for each garment. (For example, shoppers can go to theseflocks.com and buy a cute black-and-white scarf, courtesy of Nicole, an alpaca living in Great Britain.)

Other companies, such as American Apparel, with its "Made in Downtown LA" positioning, and Fair Indigo, launched by a group of former Lands' End executives, have made detailed back stories of their factory workers a core part of brand strategy. These brand platforms have become more compelling as media coverage of Chinese manufacturing issues has intensified. By some estimates, Americans buy about 1 billion garments made in China each year, or about four per person, with many of those garment workers making as little as 12 to 18 cents per hour.

For now, of course, the big question centers on price: With the economy softening and consumers cutting back on clothing purchases, will these young women still be willing to shell out more for a product that's good for the planet?

And it's admittedly tricky territory. Even for the hard-core environmentalists, it's hard to argue that Nau's completely sustainable $138 jeans or chic $198 wrap made from recycled polyester are necessities. "But there has to be a revolution in how we think," says Yolles. "It's one thing for Wal-Mart to sell a shirt for $7.50--but consumers are beginning to ask, how much did it really cost to make? What's its environmental cost? Its social cost? How long will it last? When it comes to the environment, consumers are undergoing all kinds if epiphanies."

David E. Wigder, SVP of Digitas, sees niche brands having success at promoting greener clothing. "Even mainstream retailers are weaving green into their overall merchandise," he says. "Moreover, as their cost drops over time, more sustainable fabrics will naturally be included in mainstream clothing.

"Even during tough economic times, there will always be interest in green clothing by those who can afford the premium for them."

This news story is important. I recommend that everyone read it.