Confronting the construction industry’s immense environmental footprint, this study explores a novel pathway to sustainable building materials - transforming industrial byproducts into new binders. The feasibility of utilising wood-wool cement panel manufacturing waste as a partial replacement for conventional cement was investigated. The waste, containing partially hydrated cement dust and wood fibres, is generated during the sanding stage of wood-wool cement panel production - historically discarded but now repurposed as a resource. The binder’s mechanical compressive strength and environmental impact were evaluated by substituting varying amounts of waste with CEM II cement. The findings reveal that a binder with a compressive strength ranging from 4.4 to 34.7 MPa 1 year after making can be developed. The developed binder can be used differently; for example, the binders of CEM II substitution of 20% and lower can be used as self-bearing binders for biocomposite production, and binders with larger substitution rates can be used as low-strength load-bearing binders in applications like lightweight concrete blocks and reinforced concrete frames. Alternatively, all developed materials can be used as rendering material for the interior walls based on compressive strength (CS II-IV) according to EN 998-1. This material could be a cost-effective alternative to conventional building materials, either as a binder or a material itself. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2025.