This is a matter do be checked with some detail, since some position against wool have become vocal: wool is, as expected, biodegradable (though it may be subject to chemical treatments that ruin this property); wool is recyclable, both as fabric and as industrial-use material (e.g. as an insulant); as a material for clothing, the excellent properties relative to the other options include durability (which of course - though nowadays the full importance of durability seems to be a neglected idea - reduces environmental impact); processes for the production of wool may entail some impact, independent from the material but related to the sheep.
One summary: https://thinkofthepandas.com/2022/01/13/is-wool-eco-friendly...