Cotton waste is one of the major problems with the textile industry, which contributes substantially to carbon emissions and environmental degradation. Cotton waste is generated during various phases of textile production, like fiber processing, spinning, weaving, dyeing, and apparel manufacturing. If not managed properly, this waste causes landfill accumulation, water pollution, as well as greenhouse gas emissions. However, implementing sustainable waste management strategies can mitigate the textile sector’s carbon footprint. This study explores the environmental impact of cotton waste and highlights innovative approaches to its management. It examines waste minimization techniques such as efficient processing methods, recycling, and upcycling initiatives. Additionally, it discusses the role of circular economy principles in reducing cotton waste and promoting resource efficiency. The potential for converting cotton waste into bio-based products, such as compost, biofuels, and regenerated fibers, is also analyzed. This study also evaluates policy frameworks and best industrial practices that encourage sustainable cotton waste management. Case studies of successful industrial applications are presented to demonstrate how companies can align with global sustainability goals while reducing their overall carbon footprint. By integrating eco-friendly solutions and waste valorization strategies, the textile industry can significantly decrease its environmental impact. This study aims to provide a comprehensive understanding of how cotton waste management contributes to a lower industrial carbon footprint and leads to a path for a more sustainable future.