In recent years, Portugal has undergone a profound transformation in the textile, clothing, and fashion sector. From a consolidated position as an “international factory,” primarily recognized for its quality and ability to produce for major foreign brands, the country is now beginning to establish itself as a creator of its own brands. A new business ecosystem is emerging, focused on higher value-added proposals with a clear commitment to sustainability.
The textile and clothing industry (TCI) remains one of the pillars of the Portuguese economy. In 2023, this sector encompassed around six thousand companies, mostly small and medium-sized enterprises located in the north of the country, representing approximately 17 percent of employment in the manufacturing industry. Turnover reached €8.37 billion, with exports amounting to €5.76 billion, equivalent to 8 percent of national exports (ATP, 2025). Historically recognized for its technical excellence, this sector now faces two major challenges: strengthening the business ecosystem for own brands and accelerating the integration of more sustainable practices into business models. With the impact of tariffs and global competitive pressure, these ambitions demand new strategies and strong innovation capacity.
It is in this context that ISTO is a Lisbon-based menswear brand representing a new generation of Portuguese entrepreneurs determined to create a more ethical, sustainable, and transparent model for the industry, emerges as a response to these two needs: affirming national creative identity and placing sustainability at the heart of the business. For decades, the Portuguese TCI sector stood out for its excellence in third-party production. International brands sought Portugal for quality and know-how but rarely highlighted the origin of the garments. This discreet fashion model generated wealth and technical prestige but kept national creations out of the spotlight. ISTO. was born in 2017, founded by Pedro Palha and Pedro Gaspar, to counter this invisibility and respond to the growing demand for more sustainable solutions. Whereas the logic used to be “produce quietly for others,” the goal now is to put the brand name on the label and tell its own story. True to the meaning of its name, Independent Thinking, Super Quality, Transparent Pricing, and Organic Materials, ISTO. remains committed to sustainable growth without compromising the principles that have made it a reference in the new Portuguese fashion scene.
ISTO.’s case has been studied in Fashion and Sustainability and Responsible Consumption courses that I teach in the Undergraduate and Master's programs in Management and Business Administration and the Executive Master’s in Impact Management and Sustainability at CATÓLICA-LISBON. One of the central elements of its model is radical transparency: instead of hiding margins or costs, ISTO. publishes an annual breakdown on its website showing the price composition of each item, including raw materials, manufacturing, transport, and margins. This approach educates consumers and builds trust by showing what it takes to produce locally using quality materials and fair wages.
The brand’s aesthetic is minimalist and timeless. It doesn’t follow seasons or fast trends but offers essential garments like linen shirts, organic t-shirts, blazers, and jeans designed to last for years. Production takes place mostly in Portugal, in limited series that avoid excess stock and waste. Material choices favor organic cotton, European linen, recycled wool, and other sustainable natural fibers. More recently, the brand introduced QR codes on garments, allowing customers to track the entire production journey, from fiber origin to the final product, including the associated environmental footprint.
The business model is based on direct-to-consumer channels and community building, bringing the brand closer to an audience that values authenticity. With four stores in Portugal: Príncipe Real, Campo de Ourique, Chiado, and Amoreiras—and one in Berlin, ISTO. took a decisive step in July 2025 by announcing a partnership with Altaz Capital to support its international expansion plan. This collaboration brought in Sérgio Massano as managing partner and André Flórido as CFO, joining the founders. According to Pedro Palha, this partnership ensures the operational and financial expertise needed to scale globally without losing the brand’s identity.
After successful pop-up experiences in international markets, the brand is now preparing to consolidate its global presence by opening permanent stores in London, New York, and Madrid.
This powerful combination of strong brand values, minimalist aesthetic, and direct consumer connection is beginning to cross borders. The press (Financial Times, 2024) and several international celebrities have shown interest in ISTO.’s philosophy and style: Ethan Hawke is a fan of the jacket-and-trousers set, Zac Efron chose the brand’s jeans, Ryan Reynolds was photographed wearing linen trousers, and Chris Evans, the famous Captain America, recently wore ISTO.’s pinstripe linen shirt in the film Materialistas, alongside Dakota Johnson and Pedro Pascal.
In a sector increasingly pressured by sustainability demands, brands like ISTO. point the way forward for Portugal—from being merely a top-tier supplier to becoming a creator of internationally recognized brands. The challenge for the country is to maintain the momentum of this business ecosystem, centered on innovation and sustainability, by aligning public policies, business strategies, and environmental awareness into a coherent long-term plan.
As the pressure for more responsible practices grows, like the new trade agreement between the European Union and the United States, it brings both challenges and opportunities (Portugal Têxtil, 2025). In the textile and clothing sector, the new agreement has an ambivalent effect: some products, like apparel, will benefit from lower tariffs, while others, like home textiles, will face increased costs (Machado, cited in Jornal Têxtil, 2025). Still, the 15 percent tariff applied to most European exports to the U.S. market, though lower than the initially proposed 30 percent, continues to burden sensitive sectors like textiles, clothing, and fashion.
In a global market where products made in low-cost, less-regulated countries arrive on shelves at cheaper prices, there is still no clear economic incentive to favor more responsible options. This context requires strategic reflection: while these conditions may limit the competitiveness of higher-value-added exports, they can also act as a catalyst to accelerate innovation, reinforce sustainable practices, and elevate brands committed to local production, traceability, and efficiency.
Vera Herédia Colaço, Professor at CATÓLICA-LISBON