Water scarcity and sanitation pose a critical global challenge worsened by population growth and the finite nature of freshwater resources. Despite the United Nations’ Sustainable Development Goal 6 (SDG6) advocating for universal water and sanitation access, progress remains insufficient. Presently, approximately 50% of generated wastewater is released into the environment without adequate treatment, emphasizing the urgent need to address this issue. This article examines the socio‐economic and technical aspects of both centralized and decentralized wastewater treatment systems (DWTS) and assesses the environmental impact, spatial footprint, and energy usage across treatment technologies. An economic analysis underscores the cost advantages of DWTS, especially in sparsely populated regions. With modular designs, DWTS not only provides environmental and economic advantages but also enables water reuse. The research concludes that adopting DWTS is crucial in achieving SDG6 targets and ensuring universal access to safe sanitation, especially in low‐density and newly developed areas. This thorough investigation of wastewater management contributes to the ongoing dialogue on sustainable solutions amidst escalating global challenges of water scarcity and sanitation.