The transformation of energy systems toward renewable energy sources necessitates a responsible approach to understanding and mitigating their impact on the natural environment. While previous research has primarily focused on operational aspects, a more holistic approach—such as life cycle assessment (LCA)—is crucial, as it encompasses energy installations’ production, operation, and disposal phases. This review article aims to fill this gap by comprehensively analysing the geothermal energy sector, covering electricity generation, central heating, and hot water preparation. This study emphasises the need for rigorous life cycle and water footprint assessments to understand geothermal systems’ sustainability better. Key conclusions are drawn from an extensive literature review, highlighting the sector’s challenges and opportunities. Furthermore, this article identifies innovations and research directions essential for advancing geothermal energy as an integral component of the renewable energy industry, underscoring its potential to contribute to global sustainability goals.