The utilization of leather waste (LW) in a polyurethane (PU) matrix makes a smart and novel shape stable phase change material (SSPCM). This is essential for sustainability as it reduces landfill waste after use. The PU is synthesized in bulk with a 90% yield, using biodegradable polycaprolactone diol and bio‐based polyol (castor oil), along with tolylene‐2,4‐diisocyanate. PL and PLG composites are prepared by blending of constituent components PU (P), LW (L), and poly(glycidyl methacrylate) (PGMA, G), as specified by their code names. Role of LW (hydrogen bonding and chemical crosslinking) and morphology are elucidated by FTIR and SEM, respectively. Self‐healing time (2 h), shape fixity ratios (Rf) (PL: 60–80% and PLG: 60–70%) and shape recovery ratios (Rr) (100% for both) are determined at 60°C. PLG displays faster shape recovery in water (<30 s) compared to air (>300 s). Shape stability and thermal properties of the SSPCM are examined using the temperature responsive leakage study, TGA, and DSC. This research introduces a new approach for using leather waste (LW) in SSPCM, with self‐healing and 100% Rr. This material may find application where SSPCM with high durability and flexibility is essential such as textile and footwear materials.