Applying spent mushroom substrate (SMS) in sugarcane farming can be an effective use of organic resources, promoting growth while improving soil fertility. However, most SMS is disposed of as waste, and application methods have not been adequately studied. Therefore, we verified the effects of SMS made from bagasse (SMS-B) on sugarcane and its potential to reduce environmental impacts, such as chemical fertilizer use and climate change, comparing its application with that of chemical fertilizers (CF), bagasse, and SMS from sawdust (SMS-S). The SMS-B application increased dry matter weight by producing more tillers than CF. Additionally, SMS-B improved many soil chemical properties compared with CF. SMS-B promotes the early growth of sugarcane because it contains more nutrients and has a lower C:N ratio than bagasse or SMS-S, likely due to differences in the materials used for mushroom cultivation, as SMS-B was made from composted bagasse. With a 30% CF reduction, SMS-B achieved a higher dry matter weight than the recommended CF application. Compared to the other treatments, SMS-B resulted in higher total soil carbon content relative to the amount of applied carbon. These results indicate that the application of SMS-B can promote the early growth of sugarcane and effectively reduce environmental impacts via reducing chemical fertilizer use and increasing total soil carbon content.