Very short summary:
Digest clothing/waste fabrics (cellulose fibres) to simple sugars using an industrial process (I know someone who’s just done a PhD on this, but he’s spinning the fibres back into new cloth).
Use this as a feedstock for efficient mycellium growth.
Grow sustainable packaging and/or building materias.
Not sure if the carbon footprint/economics of it work out didn’t get that far but the process seems like it may be feasible.