Bio-nanocomposites hold the promise to reduce environmental impact of plastic materials and lessen reliance on non-renewable resources as is the case for fossil-based plastics. In this study, we present chitin nanocrystal (ChNC) reinforced polylactic acid (PLA) as biodegradable polymer with natural-origin nanoparticles, enhancing the base polymer's strength. Until now, these bio-nanocomposites have been evaluated from fundamental and practical perspectives, yet, in-depth research on their environmental impact remains limited. We conducted a life cycle assessment (LCA) for upscaled ChNC production including its incorporation into PLA. We compare with the benchmark polyethylene terephthalate (PET) using ten impact indicators, primarily focusing on climate change. For PLA, PET, and ChNC/PLA (5 % particles), the production processes resulted in 3.04, 3.21, and 4.26 kg CO2 equivalent, respectively. Recycling processes greatly enhance plastics sustainability, though practical implementation remains challenging. On that aspect, compostable PLA and ChNC/PLA materials outperform conventional plastics that end up in landfill. The climate change impact of ChNC production can be reduced by 30 to 40 % by decreasing HCl and water use during acid hydrolysis and energy used during drying compared to current laboratory conditions. These insights incorporated into ChNC/PLA production and post-use strategies can guide bio-nanocomposite production toward more sustainable practices.