The objective of this work was to characterize the potential financial and environmental implications of distributed anaerobic treatment of organic industrial wastewater using encapsulated biomass. By assessing a range of design decisions and technological assumptions, opportunities to improve cost and environmental outcomes were identified and prioritized for R&D investment. To achieve this outcome, we developed a computational model for process simulation and design of encapsulated anaerobic systems, with a focus on hydrogen (H2) and methane (CH4) production. The financial viability and environmental sustainability of applying systems for onsite treatment of high-strength industrial wastewater were assessed through techno-economic analysis (TEA) and life cycle assessment (LCA) in a Monte Carlo simulation framework. The relative impacts of individual design decisions and technological assumptions on system sustainability were quantified through robust global sensitivity analyses. Finally, quantitative recommendations were provided for R&D prioritization of encapsulated anaerobic technologies.