Plastic waste from industries and manufacturing development poses a significant issue due to its exponential environmental and economic impacts. This study aims to optimize the industrial plastic waste management by exploring the different ways of handling this waste for small to medium-sized enterprises (SMEs) in the energy production sector in line with the EU and Swedish waste directives. This study draws on a mixed research method and a case study. The results disclose that proper sorting system, the implementation of waste policies and regulations, and informed waste practices based on knowledge and education in plastic waste management are essential for the implementation of sustainable plastic waste management system. While aspects such as the market demand and economic efficiency, the presence of hazardous and waste contamination, and the waste volume were identified to hinder the implementation. However, this study explored sorting techniques through the lens of practical strategies, introducing innovative solutions to address the challenges associated with mixed and contaminated industrial plastic waste. By leveraging the selective dissolution sorting technique, the study proposed the waste sorting process as essential practices to pave the way for sustainable waste management practices in SMEs in the energy sector. The findings not only contribute to the existing knowledge in waste management but also offer practical recommendations for businesses striving for efficient waste management. However, these findings necessitate implementing new protocols for waste sorting and changes in waste flow to ensure effective sorting practices. This could require investments in equipment, training for employees, creating specialized waste management department or establishing cross-functional teams to oversee waste sorting initiatives.