According to a 2024 World Economic Forum survey, climate change is the primary concern for the future. To address these challenges, adaptation measures and actions to reduce or avoid greenhouse gas emissions are necessary. Emissions from the waste management sector rank as the seventh-largest contributor to global emissions. Efforts are underway to decarbonize steel processes and promote waste reuse. “Fluff”, generated during ferrous scrap processing, poses reuse challenges due to its characteristics. This study evaluates the production of wood–plastic composites using polypropylene and “Fluff” to address environmental concerns and reduce greenhouse gas emissions. Methodologically, waste characterization preceded the extrusion of waste and polypropylene blends at varying compositions. The resulting materials were pelletized, molded, and characterized. CO2 emission reductions from waste diversion from landfills were assessed under two scenarios. In Scenario 1, emissions totaled 19,054 tons/year, while in Scenario 2, with gas capture and utilization, emissions reached 10,617 tons/year for 20,000 tons of waste annually. Composite characterization revealed favorable properties, suggesting viability for wood–plastic production. This approach supports industrial decarbonization and circular economy initiatives in the steel sector.