The fashion industry’s significant social and environmental impact and slow transition towards sustainability highlight the pressing need for transformative change in its design, production, consumption, and end-of-life practices. This study examines the challenges and opportunities of integrating design thinking into sustainable fashion business models by focussing on stakeholder engagement. By analysing the roles and interactions of key stakeholders within and surrounding the fashion industry, this research identifies the main barriers and enablers of sustainable practices and proposes innovative strategies for effective implementation. This research employs a qualitative approach, providing an empirical, in-depth examination of the Nordic fashion industry through primary and secondary data sources from fashion associations across five Nordic countries: Denmark, Finland, Iceland, Norway, and Sweden. Findings indicate that companies prioritise durable, gender-neutral, and timeless designs while promoting sustainable consumer behaviours, such as reduced washing, increased repair, and reselling. However, technological limitations hinder progress, emphasising the need for advanced solutions. Therefore, fashion managers encourage authorities to increase investment in recycling technologies to mitigate surplus production. Additionally, a standardised reporting framework is recommended to address potential greenwashing issues. Concerns persist regarding government delays in responding to European regulations that require improved sustainability standards in the fashion industry. This study contributes to the literature by integrating design thinking, stakeholder engagement, and sustainable business models in the fashion industry. It offers insights for practitioners and policymakers by highlighting the challenges of eco-friendly fashion practices and illustrates how diverse stakeholders, including authorities, fashion associations, fashion companies’ employees, suppliers, and consumers, can either enable or hinder the integration of sustainable innovations into the fashion industry business models.