<p>The leather industry, a cornerstone of the global economy, extensively employs synthetic dyes—particularly azo dyes—to impart vibrant colours and desirable aesthetic finishes to leather products. Despite their functional benefits, these dyes raise serious environmental and health concerns. Azo dyes can degrade into toxic and potentially carcinogenic amines and exhibit poor biodegradability. During leather dyeing operations, an estimated 30–35% of the applied dyes remain unbound to the substrate, leading to their discharge in effluents, contributing significantly to water pollution. Growing awareness of these issues has spurred interest in sustainable alternatives, particularly pigments derived from biological sources. Natural pigments offer an eco-friendly solution with advantages such as biodegradability, low toxicity, renewable substance, and less harmful than conventional dyes. Furthermore, their eco-friendly features like waste valorization potential, biocompatibility, antimicrobial activity, and energy-efficient production render them important in sustainable industrial applications. However, challenges related to pigment stability, standardization, extraction efficiency, and large-scale industrial implementation continue to limit their commercial adoption. This review critically examines the environmental implications of synthetic dye usage during leather making and evaluates the emerging role, current limitations, and future prospects of microbial and plant-derived pigments as sustainable alternatives aligned with circular economy principles and cleaner production standards.</p> Graphical Abstract <p></p>