The industrial alkaline battery recycling process produces an organic fraction (OF) consisting of waste paper, plastic and cardboard. Currently, this OF is used for energy recovery, given the absence of a successful alternative recycling approach, attributed to its contamination and limited economic value. This study explored the valorisation of the organic fraction derived from the recycling of alkaline batteries as a foaming agent in the production of lightweight expanded clay aggregates (LECAs). The OF, was mixed with red stoneware atomized paste (RSAP) in varying proportions (5–30 wt%) and fired at temperatures between 1000 and 1200 °C. The volumetric expansion, density, and compressive strength of the resulting aggregates were determined via mineralogical and microstructural characterization. The results indicate the organic fraction's suitability as an expansion agent, particularly at 1200 °C with 5–15 wt% inclusion, showcasing density (0.65–0.75 g/cm3) and compressive strength (1.34–1.39 MPa) comparable to commercial expanded clays. The microstructural analysis revealed the formation of rounded pores, influenced by the firing temperature and OF content. A Life Cycle Assessment (LCA) compared the environmental impacts of this process with traditional LECA manufacturing, highlighting the potential environmental benefits of using recycled battery waste. This study marks the first incorporation of this battery waste residue into LECA manufacturing, providing valuable insights into its environmental implications and paving the way for sustainable waste management practices.