Apparel is one of the most polluting industries in the world, and its production and consumption are dispersed across the global North and South. This global fragmentation of production and consumption, coordinated by lead firms such as apparel brands and retailers, creates challenges for achieving a green transition. This research-based policy note explains these challenges, focusing on pre-consumer textile waste in the context of apparel manufacturing in Bangladesh. Previous studies on the apparel circular economy have focused on textile recycling technology, efficiency, process innovation and climate change mitigation, challenges stemming from the void in circular ecosystem policies, cooperation and shared commitment between local and global actors, and traceability technology to track wellbeing, human rights, and component’s life cycle (for GHG emissions) have not been discussed. While previous studies have tended to focus on fashion brands’ perspective and post-consumer circularity, they have downplayed the supplier perspective, in particular preconsumer textile waste circularity. Our note aims to combine both perspectives, highlighting the dynamics and challenges associated with the pre-consumer textile-waste circular economy transition. We argue that achieving a circular economy requires reconfiguration of existing national business systems, institutions, and industry ecosystems as well as cooperation between institutions, global value chain actors, and technological innovations. Component-level circularity, therefore, should be designed in consistent with the firm-level, industry ecosystem-level level, and institutional policylevel dynamics including the consideration of political economy, and normative and cognitive transformations. Thus, the circular economy transition should be viewed from the system-level perspective in relation to innovation, capability upgrading, and the changing dynamics of global actors. We propose a three-dimensional matrix that can be used to assess the status of a country’s circular economy transition and identify appropriate climate action strategies for the fashion industry in Bangladesh and around the world