The production of chemicals/products so far relies on fossil-based resources with the creation of several environmental problems at the global level. In this situation, a sustainable and circular economy model is necessitated to mitigate global environmental issues. Production of biowaste from various processing industries also creates environmental issues which would be valorized for the production of industrially important reactive and bioactive compounds. Lignin acts as a vital part in biowaste composition which can be converted into a wide range of phenolic compounds. The phenolic compounds have attracted much attention, owing to their influence on diverse not only organoleptic parameters, such as taste or color, but also active agents for active packaging systems. Crop residues of varied groups, which are an affluent source of lignocellulosic biomass could serve as a renewable resource for the biosynthesis of ferulic acid (FA). FA is obtained by the FA esterase enzyme action, and it can be further converted into various tail end phenolic flavor green compounds like vanillin, vanillic acid and hydroxycinnamic acid. Lignin being renewable in nature, processing and management of biowastes towards sustainability is the need as far as the global industrial point is concerned. This review explores all the approaches for conversion of lignin into value-added phenolic compounds that could be included to packaging applications. These valorized products can exhibit the antioxidant, antimicrobial, cardioprotective, anti-inflammatory and anticancer properties, and due to these features can emerge to incorporate them into production of functional foods and be utilization of them at active food packaging application. These approaches would be an important step for utilization of the recovered bioactive compounds at the nutraceutical and food industrial sectors.