Last week saw the launch of a shiny new rebranded Oxfam. In London, three stores have been refurbished and restocked, with plans to roll out the big idea across the country. Students from the London College of Fashion will customise Oxfam’s stock of secondhand clothes to transform them into future pieces of fashion history. And the big idea is that there is a black Hugo Boss jacket cut up and restitched with fancy new epaulettes. A pair of jeans artfully ripped in strips down each leg (very Christopher Kane). Some Barratts shoes covered in a patchwork of vintage ribbon. And a piece of fabulous glittery gold brocade made into an empire-line shift dress – with a stuffed tiger sewn onto the shoulder. Well, they are students.

The premise, of course, is that, traditionally, when you buy something from Oxfam, the first thing you do is attack it with your sewing machine. Now fashion students have done that for you. Donate your unwanted clothes to Oxfam and, hey presto, they will become one-off masterpieces by the designers of the future. The students even get to sew their own labels into the clothes, so, you never know, one day you might own a bargain piece by a future McQueen or Galliano.

Clever, huh? No surprises, then, that it’s the brainchild of Jane Shepherdson, the former Topshop branding director, whose uncanny instinct for what girls want is credited for the rise of the monster fashion monolith. So, why hasn’t there been more fanfare? Ordinarily, the relaunch of a famous chain of shops, particularly one spearheaded by Shepherdson, attracts a spot of industry buzz. But no – it has been very quiet. Fashion people are more interested in what Shepherdson will do with the womenswear chain Whistles (where she is now chief executive) than what she’s up to at Oxfam.

Is it Oxfam’s fault? Or is it ethical fashion? It is undoubtedly hip to be green – we buy free-range chicken, pour Ecover into our washing-up bowls and grow our own veg – but is it time to admit that ethical fashion isn’t actually fashionable?

It’s eco-sacrilege to say it, but it’s true. Telling someone “My blouse is Mencap, my leggings are from Conscious Giving and my cardie was knitted by little old ladies in Peru” doesn’t have the same ring to it as “Check out these three quid earrings from H&M” or “I do love my new Luella handbag”.

The blame for us not buying it must, therefore, be levelled at the lack of ethical fashion you really want to wear. And I don’t mean a hat bought off a man at a festival after a rousing set by Femi Kuti, or a Love Our Earth T-shirt from a charity stall at a street market. I mean sharp, modern, impress-your-boss ethical clothes, none of which has so far been available on the rails of Oxfam – or almost anywhere else.

“Guilt doesn’t drive change, desire does,” Shepherdson says. “If you want someone to buy a Fairtrade dress, then make sure it looks absolutely gorgeous. You can’t expect people to do it altruistically, because they won’t. It needs to be stylish first, and the ethical part needs to be added value, as in, ‘Oh, it’s ethical, too – perfect.’ ”

Shame, then, that so much of the Fairtrade and organic clothing available is a fashion no-go for your average trendsetter. “Yes, it’s rubbish at the moment,” says the eco-fashion warhorse Katharine Hamnett. “But watch this space: it’s about to get much, much better.”

Hamnett and Shepherdson have cause for optimism. For starters, despite the odd guilty pleasure, our appetite for cheap, disposable fashion produced at the expense of human rights and the environment is making us feel increasingly grotty. “I think it has self-imploded,” Shepherdson says. “It’s all too accessible. When you can have anything you want for a fiver, you don’t want it any more. Maybe it’s more interesting to own something that’s harder to get.” This means that the brands we go to for our daily shopping needs must change their plans. “The high street is panicking now,” Hamnett says. “For them, supplying ethical fashion has become an economic imperative, not just a moral one. If they don’t, they’ll die. They’re all scrabbling to give us what we want.”

In fact, the best ideas are coming, not from the high street but from the environmental movement itself. A new gang of hippie capitalists is finally getting fashion for what it is: a business based on the creation of desire. They are taking on stylists and designers and upping the taste levels. In the next 10 years, one of them will get it so right that it will blow traditional brands out of the water.

One contender is Howies, the Cardiganshire-based outdoor-clothing label that was recently acquired by Timberland. “Nobody knows which of us it will be, but there is no doubt that one or two ethical fashion companies will become the next Nike,” says its founder, David Hieatt. “That growth will be based not just on sustainability, but on profit.”

Others include Oria, a new ethical gold company founded by a goldsmith and workshop manager from the jewellery label EC One; From Somewhere, a mini fashion house that reuses surplus offcuts in ways that give Jonathan Saunders a run for his money; and Keep & Share, a tiny knitwear brand that offers a free mending and hand-washing service.

Then there are the shoes that are set to be the fashion essential of summer 2008, from the US brand Toms (see No 3, right). For each pair of simple espadrille-a-likes bought, the company donates a pair to an African child. They’re £25 – and dead chic. “They have been surprisingly fashionable,” says Blake Mycoskie, the founder, who lives on a boat in the Pacific. “And when you buy them, you sleep well at night, too.”

“Watch this space and stick with us,” Hamnett says. “Next year, you’ll see ethical fashion improving radically. It’s not a passing fad – it’s a lasting trend.”

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