Dyes play a crucial role in various industries, but their environmental impact and potential health risks have raised concerns. This review paper examines the classification and applications of dyes, highlighting the challenges posed by synthetic dyes and the growing interest in natural dyes. The impact of textile dyes on human health, ecosystems, water, soil, and air emissions is explored. The focus then shifts to sustainable dyeing practices in the denim industry, which can significantly reduce its environmental footprint and enhance product sustainability. The adoption of sustainable dyes aligns with circular economy principles, leading to energy and water savings. Collaboration, consumer awareness, and the integration of Life Cycle Assessment (LCA) are essential for driving sustainable dye adoption and promoting circular economy principles. The role of Environmental, Social, and Governance (ESG) factors in sustainable denim dyeing is emphasized, encompassing environmental, social, and governance considerations throughout the supply chain. The need to address greenwashing and validate sustainability claims is discussed, highlighting the importance of certifications and transparency. Chemical dyes are recognized as key contributors to achieving sustainability targets in the denim industry, aligning with the Science Based Targets initiative (SBTi) and reducing carbon emissions. The review concludes by stressing the importance of sustainable dyeing practices, considering water and energy usage, waste generation, and emissions, to minimize the denim industry's environmental impact and achieve sustainability objectives.