And the year's biggest surprise may be that the mass-merchandisers have the largest share of the market; they sold 30% of all sustainable clothes last year.

Organic cotton is still the most significant sector within sustainable apparel--accounting for close to 70% of the market, with most of it grown in Turkey, India and China. The popularity of organic cotton has been meteoric. Global sales came in at $250 million in 2001, and by 2006, had reached $1.1 billion. In 2007, sales hit $2.1 billion. Wal-Mart, Nike and Woolworth's are among the top five consumers of organic cotton.

But organic cotton continues to be a source of consumer confusion. Because cotton requires such intense amounts of pesticides, "increasing organic cotton acreage can make a major contribution to reducing greenhouse gases and protecting water, air, soil, and wildlife. In addition, most conventional cotton is also grown with genetically modified seeds, a technology prohibited in organic production," the report notes.

While ads and labeling touting cotton as organic are governed by USDA standards, the word "sustainable" is more vague. For example, ads from the U.S. cotton industry touting the fabric as "soft, sensual, and sustainable" were banned in the UK--where they were deemed to be greenwashing, reports the Organic Consumers Association.

"JCPenney has instituted a program of several degrees of sustainable labeling for a number of its private brand products, including clothing," Packaged Facts says. And at the high end, stores like Barneys and Nordstrom have tried to stake out leadership positions. Another significant force continues to be Swedish fast-fashion retailer H&M, which has made a major commitment to organic cotton.

The categories it expects to grow the fastest include infant wear, which has long been the "gateway" to sustainable clothing, statement clothing such a "green" wedding dress, office-appropriate attire, and specialty garments such as medical scrubs.