Don't know the website but Black Sheep White Light has Icelandic rugs which adhere to very strict guidelines and are eco-friendly.

The thing to remember about sheepskin (this might be obvious, but bear with me...) is that they are made from sheep. You can look for a company that produces them (Ikea, for example, has cheap small ones, as well as large cow skins, and I don't want to know how those sheep have been treated).

The large and textured sheepskin we have on our chair was a gift from our in-laws: they live in the country, and spoke with the local butcher, who coordinated to get the skin ready (when usually they just use the meat), since apparently not that many people were looking for skins. It's a good way to avoid waste and get something more unique than a this-is-from-Ikea skin.

Before you go the "get-it-yourself" route, there is a big difference in types of wool. I suspect that the finer types that are used for making clothing would not hold up as well in a rug. Use due diligence.

We raise Icelandic sheep for the meat, fleece and hides. Check around your local area for farmers that raise sheep that way you are supporting your farmer and buying local.

There are sheep skins, which still have the skin attached and are sheep shaped, and then there are flokati type rugs, which are made from knotted wood and are standard sizes. Both have that fluffy fur look. Cheaper sheep skins tend to be small and stiff. Cheaper flokatis are not very fluffy.

Both shed like crazy in my experience with clumps of white fuzz under the furniture and stuck to your socks every day, even after 2 years! Both have to be taken to a rug cleaner for professional cleaning (instead of calling in a home rug cleaning service like Stanley Steemer). After a few cleanings the wool looks matted. I'm looking to replace mine with a shag-type rug that is not wool.

^knotted WOOL

You could look at goat skin, if you are worried about durability. My mother picked one up in Greece when she was 19 or 20. It's been kept in a low traffic area of a no pets house but is still nice 40 years later.

We have a flokati, and didn't share your experience. Yes, for 3 months or so, it shed. But afterwards, it settled down, and has been fine (we've had it 9 years -- got it for my daughter's nursery).

As well, I've never taken it to a dry cleaner: I wash it on the wool cycle in our machine. Ditto sheepskins -- I use Euclan on them.

My advice would be to try to find a small, local farmer (like tdusty) or supplier.

Well, in my opinion the term "eco-friendly" and butchered sheep (for skin or meat) doesn't go well together.... I have the smaller fake ones from Ikea. Wouldn't know if they are nice 'cos since I got them and put them on a rocking chair they seem to be perpetually occupied by one of my cats... could it be an indication that maybe fake is ok (and yes I know that I don't know how that fake Ikea one was made either...).

A pro for me of the small fake Ikea one is that you can put them together or apart which is nice for my smaller space...

My sister-in-law has the flokati kind in her dressing room, no cats around but still that place looks like there are cats with all the fluff. It is getting better now but I would not be keen on vacuuming it for fear of it turning "bald"...

If you do decide you need a real one, why not look for second hand, maybe you can save one from being thrown out? Or indeed try to find a "small" supplier if you want new..

I scoured online, but everything was out of my price range. Then I stumbled on my local sheep and wool festival. It only happens once a year, but there was so much seleciton. I got a high quality pelt for a faction of the price. The farmers gave me great advice on how to care for it as well. It's worth waiting for!

Overland Sheepskin: http://www.overland.com/stores/taosnm.aspx

Very high quality. We have had a small "baby rug" for years. No shedding. Very soft. In the past all sheep were raised near Taos, NM. Now I think they offer Australian and Icelandic sheepskin.

I have one from black sheep (white light) and it's gorgeous. Their skins are really large and the hair is really long, so they aren't suitable for putting on a chair or anything like that. I use mine as a rug next to my bed. Over time it does start to look kind of ratty, but that's when it's time to brush it out. They have washing instructions on their site, but I've never done more than shake it and brush it.

The ones at IKEA come from food sheep, as are the cow hides. So, they are something that would have been thrown away otherwise. They are not as uniform (from one to another) as the more expensive ones, but I feel like that makes them more interesting.

I recommend Three Cheers Farm in PA: http://threecheersfarm.wordpress.com/organic-lamb-sheepskins.

They sell delicious organic free range lamb and sheepskins.
Their sheepskins range in price from $75 to $150. The link also has washing directions.

Buy a fake one!

I've always bunged my sheepskin hide rug in the washing machine with wool detergent, let it drip-dry thoroughly in the sun, and then gently 'brushed' it with a comb to get the hair fluffy again. Works fine.

And eco-friendly-wise I'd rather have a local sheepskin than use yet more spun-plastic-derivative faux-fur. If you wear leather shoes, there's no real difference.

http://www.sheepskinstuff.com/Sheepskin_Rugs_s/1814.htm

I have two white ones from Sheepskinstuff. Great quality New Zealand and Australian sheepskins. Haven't had any issues with shedding and also like that it is a family owned business. When you put them next to the ikea ones, they are not even comparable.

I second the throw your sheepskin rug in the washing machine and drip dry - the one next to my bed has been washed like that 100s of times.

Interested to see this post as I have just bought a rug from these guys - Langley Chase Organic Farm which only rear rare-breed sheep and have won a ton of food awards for their meat. (www.langleychase.co.uk/rugs.htm). Good thing about them is that each rug is individual, can choose the exact one you one you want and they will ship anywhere in the world.

The following article contains lots of useful information in purchasing sheepskin rugs:

http://gregoryann.wordpress.com/2013/03/08/my-newfound-love-of-sheepskin-rugs/