Any animal with hair, fur, wool, etc., benefits from grooming – including humans1.
There are primarily two kinds of sheep, one hair (kemp) and one which produces a woolly undercoat in winter. Hair sheep have been domesticated primarily for milk and secondarily for meat. Wool sheep were domesticated for primarily for wool production, and secondarily milk and meat. There are still wild sheep of both hair and wool varieties. The wild wool sheep and some domesticated primitive wool sheep still shed their woolly undercoat in spring2,3, but the majority of domesticated wool sheep need to be sheared annually as the shedding genes have been bred out.
The majority of domesticated sheep are now kept for meat and milk, and have poor quality fleeces which are often unfit for any use – though some can be used as a natural home insulation. It costs the farmer to have such sheep sheared, and the farmer then has disposal costs. As a result there’s a trend towards breeding natural shedding back into some breeds, such as the Wiltshire Horn:
So yes, whether natural shedders like the Soay, or shearing sheep like Merino, sheep need to get rid of their winter undercoat, and we would use the cast-off or sheared fleece either way. Wool is strong, insulating, water-repellent, breathable, anti-microbial, hypoallergenic, non-flammable, renewable, and (if you buy locally) low carbon-footprint4,5, unlike synthetic substitutes. Its processing is non-polluting and very easy on the environment (sheep graze otherwise unusable land, and improve it), compared with many plant-based substitutes. Accept no substitutes!