The industrial clusters literature has shaped contemporary thinking on the potential of small firms to become globally competitive through agglomeration gains and collective action. However, clusters often generate negative environmental externalities. The industrial ecology framework suggests that producer agglomerations can spawn closed loop production arrangements that reduce environmental diseconomies. To date there has been little engagement between the industrial cluster and industrial ecology approaches. This paper addresses this critical gap by integrating the industrial cluster and industrial ecology frameworks. It analyses case evidence from the Banwol-Sihwa textiles dyeing cluster in South Korea to show that ‘eco-collective efficiency’ is achievable through cluster-based collective action. This can result in closed loop production and cluster-wide economic and environmental gains. Critical to achieving this is local social embeddedness, cluster-based institutions and the role of coordination powers.