This study addresses the environmental challenges associated with high-performance rare-earth magnets, particularly NdFeB, which are essential in green and digital technologies. By employing Life Cycle Assessment (LCA) with openLCA software, we evaluate the environmental impacts across the life cycles of ferrite, NdFeB, and MnAlC magnets, focusing on extraction, processing, and recycling. Various studies have explored different aspects of the LCA of NdFeB magnets, focusing on production methods, recycling processes, and the environmental impacts of different rare-earth sources. A comparative LCA highlights the significant environmental footprint of rare-earth magnets, underscoring the role of functional unit selection: when assessed per unit of energy density, the environmental impact of NdFeB magnets aligns more closely with alternatives. Methodological issues such as data quality, choice of functional units, and system complexity affect LCA accuracy, as inconsistencies in data or scope led to potential distortions in environmental assessments. This research also explores manganese-based magnets as viable alternatives to reduce reliance on rare-earth materials. Legislative initiatives, including the EU’s Ecodesign Directive and Critical Raw Materials Act, support sustainable management practices to ensure reliable material supply while promoting environmental protection. This paper highlights the importance of sustainable magnetic materials, emphasizing the need for interdisciplinary research to balance technological efficiency and environmental impact, especially as rare-earth magnet demand rises with the transition to renewable energy sources.