The textile industry is one of the largest contributors to the looming climate crisis. Cotton, the most popular fabric, severely harms the environment because of its high water and carbon footprint. In current times, achieving sustainability is of utmost importance. Lyocell, a regenerated cellulosic fiber, is an eco-friendly alternative that offers similar benefits as cotton. However, due to the use of hardwood as a raw material in commercial production, it is twice as expensive and hence not widely adopted. This literature review evaluates the use of other raw materials that can be substituted into the conventional lyocell production process. The cost-effectiveness, time needed for implementation, and environmental impact of the method of generating the dissolving pulp and additional steps required for each alternative have been compared. After a critical evaluation, it was concluded that polycotton waste would be the most suitable alternative raw material as it will not harm the environment while also reducing pollution and offering a solution to recycle textiles and PET plastic, hence promoting sustainability and restoring the environment.