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Carbon dots (CDs) are an emerging class of nanomaterials with attractive optical properties, which promise to enable a variety of applications. An important and timely question is whether CDs can become a functional and sustainable alternative to incumbent optical nanomaterials, notably inorganic quantum dots. Herein, the current CD literature is comprehensively reviewed as regards to their synthesis and function, with a focus on sustainability aspects. The study quantifies why it is attractive that CDs can be synthesized with biomass as the sole starting material and be free from toxic and precious metals and critical raw materials. It further describes and analyzes employed pretreatment, chemical-conversion, purification, and processing procedures, and highlights current issues with the usage of solvents, the energy and material efficiency, and the safety and waste management. It is specially shown that many reported synthesis and processing methods are concerningly wasteful with the utilization of non-sustainable solvents and energy. It is finally recommended that future studies should explicitly consider and discuss the environmental influence of the selected starting material, solvents, and generated byproducts, and that quantitative information on the required amounts of solvents, consumables, and energy should be provided to enable an evaluation of the presented methods in an upscaled sustainability context.