The pulp and paper industry (PPI) is a major contributor to the global economy, but it also poses a challenge for waste disposal, as it generates large amounts of several waste streams. Among these, paper rejects are generated during the papermaking process and could account for up to 25% of the produced paper. Moreover, hundreds of millions of tons of paper are produced annually that end up in landfills if not burnt or recycled. Furthermore, the PPI significantly contributes to climate change and global warming in the form of deforestation and water and air pollution. Therefore, the impact of this industry on the sustainability of natural resources and its adverse environmental health effects requires special attention. This review focuses on discussing the sustainable routes to utilize paper waste and rejects from the PPI towards a circular economy. At first, it discusses the industry itself and its environmental impact, followed by the possible sustainable approaches that can be implemented to improve papermaking processes as well as waste management systems, including paper recycling. The literature indicates that paper recycling is crucial because, if appropriately designed, it significantly lowers greenhouse gas emissions, water and resources consumption, and manufacturing costs. However, several concerns have surfaced about the different chemicals that are used to improve recycling efficiency and recycled paper quality. Furthermore, paper recycling is limited to up to seven times. This review, therefore, goes on to highlight several sustainable waste management routes for paper waste utilization other than recycling by emphasizing the concept of converting paper waste and rejects into energy and high-value materials, including biofuels, biohydrogen, biomethane, heat, nanocellulose, hydrochar, construction materials, and soil amendments. Both the benefits and shortcomings of these waste management routes and their applications are discussed. It becomes clear from this review that sustainable management solutions for paper waste and rejects are implementable, but further research and development are still needed.