The accumulation of organic dyes and heavy metals (HMs) in sewage sludge (SS) after wastewater treatment is a significant problem due to the non-degradable nature of these pollutants. Moreover, the simultaneous removal of HMs and dyes in the complex process of SS treatment, such as anaerobic digestion (AD), has become attractive. HMs and dyes present in SS can have a detrimental effect on anaerobic digesters. These pollutants not only inhibit the production of methane, which is crucial for biogas generation, but also affect the stability of AD treatment, which can result in failure or inadequate performance of the AD process. This review highlights a novel method of removing HMs and dyes from the AD process of SS through the use of biochar modified with polyvinyl alcohol (PVA) and chitosan (CTS). The applications of conventional biochar have been limited due to poor adsorption capacity. However, modification using PVA/CTS composites enhances properties such as surface functional groups, adsorption capacity, porosity, surface area selectivity, and stability. Furthermore, this modified version can function as an additive in AD of SS treatment to boost biogas production, which is a viable source for heat generation or electricity supply. In addition, the digestates can be further processed through plasma pyrolysis for the removal of HMs and dyes bound to the modified biochar. Plasma pyrolysis generates two major products: syngas and slag. The syngas produced can then be used as a source of hydrogen, heat, and electricity, while the slag can potentially be reused as an AD additive or as a biofertilizer in the agricultural sector. Additionally, this study addresses the challenges associated with this integration and biochar modifications, and offers an outlook on understanding the interactions between the modified biochar properties, microbial dynamics, and the presence of micropollutants to ensure the economic viability and scalability of this technology. This comprehensive review provides insights into the potential of PVA/CTS-modified biochar as an effective additive in AD systems, offering a sustainable approach to SS treatment and valuable resource recovery.