The depletion of fossil resources and the resulting global warming are the primary motivators for moving from a fossil‐based to a biobased economy. Biorefineries, like petro‐based refineries, offer a green and sustainable option for producing marketable biobased goods through decarbonization pathways, hence upgrading the bioeconomy. In the context of the industrial revolution, economic and environmental sustainability are critical in adopting biorefinery systems. However, biorefineries still face numerous hurdles. There are numerous technological, economic, ecological, sociological and long‐term issues throughout the biorefinery production chain. The key difficulties facing biorefineries today are acceptance in the present market of the ‘fossil‐based economy’, the composition and availability of feedstock, the quantities needed to meet the market demand, the efficiency of the resource recovery, techno‐economic viability and sustainability. Life cycle assessment may provide a thorough input on the environmental setting during process optimization, minimizing the biorefinery project's environmental impact. In this review, we outline the bottlenecks and obstacles that biorefineries face while producing biofuels from biomass, as well as how biotechnology and modern technology might help researchers to overcome them. Biorefineries need to optimize their biomass usage to generate products that properly fit the market expectations. These items should be cost‐effective when compared with fossil fuels. Currently, 85–90% of petroleum refinery output is used to make fuels, with only 10–15% going to the petrochemical industry to make organic compounds. To precisely match market demands, the biorefinery should produce the same proportion of fuels and organic compounds. To overcome the challenges, biofermentation, membrane technologies and oxidation processes, among other developing technologies, are drawing interest in several areas of biorefinery. Biorefinery systems necessitate a systematic process for identifying impacts and assessing their long‐term viability. © 2022 Society of Chemical Industry and John Wiley & Sons, Ltd.